This is a chapter from the Bloomsbury Professional book Houseman's Law of Life Assurance, 14th edition, which is an authoritative guide for insurance practitioners and covers every aspect of life assurance law. The latest edition of this key text includes coverage of the recent changes at the European level, including the creation of the European Insurance and Occupational Pensions Authority (EIOPA) and its role in the Solvency II Directive. It examines proposed changes to UK regulation being split between the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA). Other proposed changes covered by the book are the Retail Distribution Review.
Table of Contents
The slightly archaic term 'title' in this respect means the right to the policy or evidence of such a right or even more simply ownership of the policy.
9.1 When a contractual obligation is released and the contract (such as a life policy) brought to an end it is said to be 'discharged'. Discharge of a contract usually takes place in one of the following ways:
(3) breach; or
The obligations under a life assurance policy may be terminated in any one of such ways.
9.2 As the parties form their contract by agreement, so it can also be ended by agreement. An agreement by the parties to an existing contract to extinguish the rights and obligations that have been created is itself a binding contract provided that it is either made by deed or supported by consideration.
In the case of a life policy, the policyholder and the life office may agree that on surrender of the policy for a cash payment the policy will cease. The consideration for the policyholder is the surrender value and for the life office it is the release from having to provide any further benefits under the policy. In many life policies there will be specific terms relating to the surrender of the policy and the calculation of any surrender value (assuming the policy has accumulated a surrender value). Of course many life policies are structured so that they would never provide a surrender value, for example term or temporary assurance policies.
The policyholder and the life office may similarly agree to vary the terms of a life policy. They may, for example, alter a whole life assurance so that premiums are reduced with a corresponding reduction in the sum assured. Evidence of such a variation may be provided by what is known as an 'endorsement' set out in a separate document which may be attached to the original policy document. Alternatively, it may possibly just be evidenced by written correspondence between the life office and the policyholder. The terms of the policy may contain terms providing the ability to amend its own terms. In some circumstances a new contract may arise as a result. Care should be taken when varying the terms of a life policy because if this constituted a 'significant variation' this could have an adverse effect on qualification and potentially result in a chargeable event for income tax purposes (see further Chapter 13).
9.3 Where the original obligations of one party are released by the other in consideration of obligations being undertaken by a third person the effect of this is a new contract and the original contract is said to have been discharged by novation.
The transfer of obligations under a life assurance contract from one insurance company to another will now generally be effected under the provisions of Part VII of the Financial Services and Markets Act 2000 (which replaced Section 49 and Schedule 2C of the Insurance Companies Act 1982), without the consent of the policyholder necessarily being obtained.
9.4 A breach of contract by one party, no matter what form the breach takes, always entitles the other to commence an action for damages. However, only nominal damages will be awarded where no loss has been suffered as a result of the breach and, in practice, it would not be worth pursuing an action.
The common law rule is that the right of a party to treat a contract as discharged by a breach arises where the party in default has repudiated the contract before performance is due or before it has been fully performed. He is deemed to have repudiated the contract where he has totally or partially failed to perform his obligations under the contract. However, if the said failure is only partial then it will be a repudiation of the contract only if the party in default has committed what is known as a fundamental breach, ie if, having regard to the contract as a whole, the promise that has been broken is of major importance. As stated by Chitty: 'Any breach of contract gives rise to a cause of action; not every breach gives a discharge from liability'.(See cases such as Suisse Atlantique Societe v NVR Kolen Centrale, Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltdand Dalkia Utilities Services plc v Celtech International Limited).
A written contract usually contains within its own terms the circumstances in which it may be terminated as a result of breach; and that is normally the case for life policies. For example, the payment of the premium is always made a condition precedent. Payment of the premium is not ordinarily enforceable by the life office, and failure to pay it within the conditions defined by the policy or agreed by the parties is likely to result in the lapse of the policy or the reduction of the benefits covered on a basis defined in the policy. This latter consequence is known as the policy being made 'paid up'. Temporary non-payment may be catered for by 'payment holiday' provisions within the policy terms or possibly by 'days of grace' provisions giving a specified number of days for the premium to be paid before, for example, the policy is lapsed.
The contract may similarly be discharged if the life assured breaks one of the conditions of the assurance, eg if he engages in some hazardous pursuit, participation in which is a ground on which the policy is expressed to become void. In practice it is unlikely to come to the attention of the life office during the existence of the policy but what is more likely is for a policy to be avoided at the claim stage on the basis that the policyholder has not disclosed a material fact, for example the policyholder dies whilst flying a private plane which crashes when he had not disclosed that he undertook such an activity (see further Chapter 2).
9.5 A contract is discharged by performance, ie by carrying out the obligations under the contract. Where the contract is to pay money, performance may be by payment or by tender. When a cheque is given in payment of the debt it is usually accepted merely as a conditional payment. The taking of the cheque suspends the right of action on the contract but does not extinguish the contract until the cheque is paid. If the cheque is not met, the right to payment in the original contract revives. The payee may refuse to accept the cheque and insist on cash; payment must then be made in legal tender, although the precise terms of the contract, where relevant, need to be considered to ascertain the precise position.
Tender other than legal tender does not discharge the debt but is a good defence to an action claiming the amount already paid. Legal tender is a tender of money which is in legal currency.
The policy terms relating to payment of claims are the first place to look. There is likely to be a requirement to execute the life office's standard claim form, which is likely to incorporate a formal discharge to the life office. It may also contain an indemnity against further or third party claims. The Financial Services Authority have indicated that they do not consider the word 'indemnity' to be 'plain and intelligible language' and so it should be replaced by appropriate language as well as otherwise being fair. Historically, it was usual to provide that the claim under a life policy shall be paid at the principal office of the assurance company. This is not so common or relevant in modern times although if the question relates to the place of performance of the contract (for example, in relation to a conflict of laws query) then there is generally a choice of law clause indicating the law of England and Wales.
It is not thought that the debtor office must go to disproportionate lengths to seek out its creditor and pay him on the basis that the policyholder (or his successors in title) is in possession of all relevant facts (or should be).
As a result of the Second Life Directive the law of the contract may be the law of the country in which the policyholder is habitually resident where there is no express or effective choice of law, in which case the question of mode of performance/discharge would be governed by the law of that country which could cause difficult practical problems. The policy should ideally also specify the currency in which payment is to be made.
9.6 Much will depend on the type of life policy in question. Endowment life policies will be payable to the policyholder on survival of the life assured to the end of the term or to his executors or administrators (personal representatives) on proof of his death during the term of the policy. Whole of life policies will also be payable on death to the personal representatives on proof of title (by the grant of representation) or to the policyholder himself on surrender or encashment. Payment to the policyholder is more likely for investment orientated whole of life policies such as 'Investment Bonds'. Term or temporary policies will only ever be payable to the personal representatives (or the policy will expire where the life assured survives until the end of the term). In all the above cases payment will be subject to proof of title, and of age where that is required. The above examples assume that the policyholder and life assured are the same person. Of course the policyholder may be some other 'successor in title' such as assignees or trustees of a trust which the policy was subject to. So for policies subject to trust or which have been assigned, payment on death of the life assured (or on surrender) would be made to the trustees or assignees and not to the personal representatives..
By making payment to the person entitled , the life office is discharged or released from its obligations under the contract. If the life office pays to the wrong person it will not have discharged its liability under the contract. The term 'discharge' is often used loosely to refer to what is in fact a receipt which is merely evidence of payment of money. However, a formal receipt may be combined in one document with a discharge of all claims under the policy.
The policy terms are likely to contain provisions on how notice of a claim is to be given to the life office. Usually this must be given in writing. The notice is likely to have to be given to the life office at a specified address. Generally, with life assurance the time at which a claim is made is not normally as important as under, for example, general insurance or indemnity-based insurance and so a specific time limit for a claim is not common. However, it is possible to envisage situations where making a claim within a certain time period could be important, for example non-disclosure of a known medical condition where the passing of time may mean that vital evidence is no longer available. On receipt of notice, the life office will normally require the completion of a standard claim form or discharge form. This will usually provide for an acknowledgement by the claimant that he will have no further claims against the life office in respect of that benefit. It may go further and contain an indemnity in favour of the life office regarding any subsequent claims by third parties (although see 9.5 above). Clearly, the life office will not be protected where it can be shown that it was aware that it was not paying to the correct person.
The position of partial surrenders or withdrawals must also be considered as the remainder of the policy will continue in force. Some types of contracts expressly provide for the policyholder to take partial surrenders or withdrawals (usually investment bonds). There are likely to be terms relating to the method of withdrawal, level of withdrawals and the residual value of the policy and other matters so it is important to have regard to the precise contractual terms. It is also important to consider the taxation consequences of partial withdrawals (see further Chapter 13).
9.7 A life office may only safely pay policy moneys to the person or persons entitled to them . The life office should always obtain its discharge by paying the person entitled to sue at law for the policy moneys, or some person properly authorised by him to receive them. If the office accepts anything less than the discharge of the person entitled to sue at law, then it stands the risk of having to pay out twice on the policy. The person entitled to suewill either be the original policyholder (ie the person with whom the contract was made by the life office, known also as the 'grantee' or 'assured'), or his personal representatives; but may be his trustee in bankruptcy, or the trustees under a Married Women's Property Act policy, or the trustees of a trust declared in respect of the life policy, or a legal assignee of whose assignment the office has received notice, or a mortgagee. An appropriate payee may also be an attorney under a general or lasting power of attorney or a deputy under a Court of Protection Order. The life office should not pay an equitable assignee without the agreement of the person entitled at law to sue. Where the office has notice of an equitable interest (other than a beneficiary's interest under a trust, will or on intestacy and other than the equity of redemption under a mortgage) the person entitled to such interest should be required to join in with the legal owner before the life office makes payment.
If the policy is expressed to be payable to a third party (ie some person other than the policyholder), such a person may not have the right to sue and the policyholder (or his successors in title) alone may have the right to enforce the contract. This is subject to the Contracts (Rights of Third Parties) Act 1999, depending on whether the provisions of the Act have been expressly excluded. Assuming it has not been excluded the policy may be worded so that payment to the third party is an essential term of the contract, in which case the company can carry out the contract by paying him, and the carrying out of the contract will discharge it by performance. Although such a payment may be a good discharge to the life office, the person to whom the payment is made may have to account to the personal representatives of the policyholder. A person will not normally be able to sue on the policy unless it is executed by deed or the Contracts (Rights of Third Parties) Act 1999 has not been excluded and the contract gives benefits to the third party or expressly provides that he may enforce it. If the payee is merely an agent of the policyholder, his mandate may be withdrawn, and is normally withdrawn automatically by the policyholder's death. Therefore, if the policy is payable to a third party and payment to him is not expressed to be an essential part of the contract, the office should only pay to, or on the express authority of, the policyholder or those deriving title through him.
Section 43 of the Companies Act 2006 provides that a company may contract by writing either under its common seal, or by any person acting under its express or implied authority. This Section also provides that the same formalities required by law in the case of a contract made by an individual also apply, unless a contrary intention appears, to a contract made by or on behalf of a company.
Therefore, where a company wishes to deal with a life office, for example if it wishes to insure an employee's life, the proposal form can simply be signed by an authorised signatory. The life office can always rely on Section 40 of the Companies Act 2006, whereby a third party acting in good faith with a director or a person authorised to act on behalf of the company will bind the company even if the action in question is ultra vires (beyond the powers of) the company.
Since 1989, if a company wishes to execute a deed, it need not affix its common seal. Indeed, it need not even have such a seal. A deed signed by two authorised signatories (directors and/or, for a private company, the company secretary) or by one director in the presence of a witness and expressed to be executed by the company will have the same effect as if it had been executed under seal.
Where there is any doubt about the persons authorised to sign discharges on behalf of a company or corporation, the life office may either obtain a discharge under the company's seal, duly attested, or require evidence that the person signing is authorised to do so.
The Limited Liability Partnerships Act 2000 provided for the creation of limited liability partnerships (LLPs). The Limited Liability Partnerships (Application of Companies Act 2006) Regulations 2009 apply the execution provisions applicable to companies to LLPs.
9.9 Regarding payment of claims by cheque, the Cheques Act 1992 provides that a cheque crossed and marked with the words 'account payee' or 'a/c payee', either with or without the word 'only', will not be transferable. Payment of a claim, whether by one sum or by instalments, may be made by cheque although it is becoming increasingly common for the policy moneys to be paid directly into the claimant's bank account.
In many cases the sum assured will be a fixed amount and so there is no question regarding the amount to be paid out. However, in other cases, for example with investment bonds, a calculation of benefits is required. With investment bonds, the death benefit may be expressed as, for example, 101% of the value of the units allocated to the contract, with the relevant value being taken as at the first valuation after notification of the death, but in all cases the precise terms of the policy would need to be examined.
It is unusual for the policy to provide for payment to be made at any particular time. Payment of benefits should normally be made within a reasonable time of the claim. If there is a need to investigate matters concerning the death and title to the policy this would obviously tend to extend the time between claim and payment.
When payment is made, any outstanding premiums will normally be deducted from the proceeds payable. Interest is likely to be payable on the policy proceeds either as the result of any relevant policy term or, if there is not one, life offices which are members of the Association of British Insurers would still ordinarily pay interest in accordance with the 'Long-Term Insurance: Statement of Normal Practice'. Essentially, this provided that the insurer will pay interest on claims delayed more than two months from the happening of the insured event (or for unit-linked policies from the cessation of the unit linking if later) unless the amount of such interest would be trivial. Interest is calculated at a relevant market rate from the end of the two-month period until the date of actual payment. For example, where there is a delay between death and the personal representatives obtaining a grant of probate, interest will be payable on the proceeds less any overdue premiums. A statement of account will be sent to the claimant explaining how the amount paid has been calculated.
In an Issues Paper published on 23 March, 2010, the English and Scottish Law Commissions expressed the view that insurers who delay paying valid claims should be liable to policyholders for any foreseeable losses they cause. Currently, even if payment of an insurance claim is delayed for years, the insured cannot claim compensation for any additional losses caused by that delay. However, this was stated to be unfair, biased and ignores commercial reality. The tentative solution is to amend the law so that policyholders would be able to claim damages in cases where an insurer acts in bad faith and to make insurers liable if they fail to pay a valid claim within a reasonable time. Although not a life assurance case the Court of Appeal in Sprung v Royal Insurance (UK) Ltd highlighted the perceived injustices in this area of the law. In this case it was decided that there can be no claim for consequential loss by an insured for breach of a contract of insurance.
9.10 More detail on TCF is contained in Chapter 5. The spectrum of TCF is wide ranging as it increasingly permeates the financial services industry as a result of the FSA making it clear that it will be a central part of their move towards a more principle-based regulatory regime. Clearly, in dealing with customers at the claims stage the organisation's approach to TCF will be brought sharply into focus.
In July 2006 the FSA issued a paper entitled 'Treating Customers Fairly – towards fair outcomes for consumers'. The desired 'Outcome 6' is that 'consumers do not face unreasonable post-sale barriers imposed by firms to change product, switch provider, submit a claim or make a complaint'. The FSA explain that post-sale barriers to fair treatment can be cultural, contractual or competitive. The consumer should be able to change products or switch providers without incurring excessive penalty. The reference to 'penalty' is probably not used in a strictly legal sense as penalty clauses in contracts are not generally upheld anyway. Firms should also not make it unnecessarily difficult for consumers to make claims or to complain when something goes wrong.
In March 2011the ABI issued the 'Good Practice Guide: Handling Customer Claims' which was partly intended to help companies meet TCF objectives. Much of the guidance reflects what now happens (or is intended to happen) in practice although some aspects of it possibly go a step further for some providers. For example, specifically drawing attention to exit charges or 'penalties' which may reduce benefits; sending 'warm-up' communications to customers ahead of maturity dates so that they can start planning and developing a flexible approach to claims documentation.
9.11 Any life assurance policies which are within the ICOBS regime ('pure protection contracts') will, in relation to claims, be subject to the Insurance Conduct of Business Sourcebook and, in particular, ICOBS 8.1.1 and 8.1.2. These rules require an insurer to handle claims promptly and fairly; provide reasonable guidance to help a policyholder make a claim and provide appropriate information on its progress; not unreasonably to reject a claim and to settle claims promptly once agreed.
9.12 In the absence of fraud it will be unreasonable to reject a claim even if there is non-disclosure of a material fact if the policyholder could not reasonably have been expected to disclose it. It would also be unreasonable to reject a claim even if it is a material fact if the misrepresentation is not negligent. It would be reasonable to reject a claim where, for breach of warranty or condition, the claim is connected to the breach and either: (a) if a 'life of another' case, if the life assured had made the statement in respect of a policy which he had effected, the insurer could have rejected the claim; or (b) the warranty is material to the risk and was drawn to the customer's attention prior to the conclusion of the contract.
9.13 Prior to the case of Kleinwort Benson Ltd v Lincoln City Council it was not possible to recover any amounts paid by mistake if the mistake was one of law. With regard to the long-standing rule concerning mistake of law, it was held (Lords Browne-Wilkinson and Lloyd dissenting) that this should no longer be maintained as part of English law.
With regard to mistake of fact it is clear that where the mistake is one of fact material to the mistake, it may be able to recover the money in an action for money had and received. The mistake need not be mutual, nor need there be any fraud or misrepresentation by the payee. By way of example, in Admiralty Comrs v National Provincial and Union Bank of England Ltd recovery was made of money paid into the current account of a deceased customer of the bank in the belief that he was alive. A person who accepts and keeps money to which he knows he is not entitled because of a mistake by the payer may furthermore be guilty of theft.
R v Gilks
G kept £106 of £117 paid to him by a bookmaker which he knew he was not entitled to because of a mistake on the bookmaker's part. He admitted he knew of the mistake, but said it was 'hard lines' on the bookmaker and 'there is nothing dishonest about keeping the money'. Held, by the Court of Appeal that he was properly convicted of theft under Section 1(1) of the Theft Act 1968, since he was guilty of theft at the moment he accepted the money. But the refusal to restore the money was not theft as he was under no obligation to restore a sum which arose out of a betting transaction.
9.14 Where a life office pays moneys under a mistake of fact, not realising the true position, it will still be entitled to recover even if it had been careless in its investigation of the facts. The general rule is that carelessness is irrelevant. Having the means to obtain the knowledge is not regarded as synonymous with knowledge for these purposes.
Kelly v Solari
The plaintiff was the director of a life assurance company. The defendant's husband had been insured, but had not paid the last premium. The insurance therefore had lapsed, and the lapse had been noted by the company. The defendant claimed the policy moneys, on her husband's death, and the plaintiff, forgetting the lapse, paid them to her. It was held, that the moneys could be recovered by the plaintiff.
In Kelly, Parke B laid down the principle that money can be recovered if paid:
'upon the supposition that a specific fact is true, which could entitle the payee to the money, but which fact is untrue, and the money would not have been paid if it had been known to the payer that the fact was untrue…'
This principle was cited with approval in the case of:
Barclays Bank Ltd v WJ Simms Son & Cook (Southern) Ltd
A housing association, a customer of the plaintiff bank, drew a cheque in favour of a builder to cover an interim payment under a building contract. When the builder went into receivership the association immediately stopped the cheque. The defendant receiver, however, in good faith, had it specially cleared and, owing to an oversight by the plaintiff, paid. The bank sued the liquidator for money paid by mistake, relying on Kelly v Solari. They said that they had paid the cheque in the mistaken belief that it had not been stopped. It was held that they could recover.
For such cases of unilateral mistake it should be noted that in order to be entitled to rescind the contract the mistake must relate to a term of the contract.
In addition, the case of Hartog v Colin & Shields emphasised the state of mind of the party seeking to enforce the contract against the mistaken party. So, for example, if that party either knew or must be taken to know that a term of a contract is incorrect then he cannot enforce the contract.
9.15 It may be inequitable to require that the money be repaid, where there has been some representation by the life office which has misled the person to whom the money was mistakenly paid and caused that person to alter his or her position. This is the rule known as 'estoppel'. However, the fact that such a person cannot be put into the same position he was in before the money was paid will not necessarily prevent the money being recovered. If it can be shown that the payee would not have spent the money if he had not been influenced by the payer's mistake, the payer will not be able to recover.
Avon County Council v Howlett
The defendant was injured in the course of employment with the plaintiffs and as a result was absent from work for nearly two years. The plaintiffs discovered that during that period they had overpaid the defendant to the extent of £1,007. They brought an action against the defendant claiming repayment of that sum on the ground that it had been paid by mistake. It was held that the plaintiffs were estopped from asserting their right to repayment. This was due to the fact that the plaintiffs made representations to the defendant which led him to believe that he was entitled to treat the overpaid moneys as his own. The misrepresentations were not caused by incorrect information given to them by the defendant and the overpayments were not brought about by the defendant's own fault. The defendant changed his position in reliance on the representations, by losing the claim for £86.11 social security benefit and expending the sum of £460.50 which he would not have incurred if he had not been paid the moneys in dispute. Therefore, the plaintiffs should be estopped from recovering the overpaid moneys at least to the extent of £546.61. However, Slade LJ held that estoppel was incapable of operating pro tanto, ie in respect of part only of the overpaid moneys, on the basis that it was contrary to principle and authority. He did add, however, that there may be exceptional circumstances where estoppel could operate to prevent the payer from recovering part but not all the overpaid moneys. However, such circumstances did not exist in the particular circumstances of the case.
9.16 The cases of Kelly v Solari and Avon County Council were considered in Scottish Equitable plc v Gordon Derby.
Scottish Equitable plc v Gordon Derby
Scottish Equitable (SE) claimed restitution of £162,000 paid to GD under a mistake of fact as to the amount of the final retirement benefits to which he was properly entitled. In calculating and paying out these benefits, SE failed to take into account certain benefits that GD had taken early. The total overpayment was £172,451. This was applied by GD in reducing his mortgage, on ordinary living expenses and the balance in a new pension fund with Norwich Union (NU). GD relied upon change of position and/or estoppel, contending also that carelessness was a bar to the recovery of money paid under a mistake. In the circumstances NU were prepared to unwind the policy and return him to the position he would have been in if SE's mistake had not been made. At first instance, Harrison J held that mere carelessness did not preclude the recovery of money paid under a mistake of fact, and GD could not rely on either change of position (there was no causal link) or estoppel by way of defence to SE's claim for the balance of the overpayment. The Court of Appeal held that the judge correctly applied the test set out in Kelly v Solari. The defence of change of position was not available to GD as the changes made by GD to his lifestyle were modest and not irreversible. The Court of Appeal also agreed with the judge that the defence of estoppel was precluded by the decision in Avon County Council v Howlett mainly because it is incapable of operating 'pro tanto'. It can only ever be a complete defence which would have been inequitable in this case. However, with regard to the pro tanto operation of the rule signposted in Avon County Council v Howlett for a case where the decision was that a partial retention of money was appropriate see National Westminster Bank plc v Somer International (UK) Ltd.
The Pensions Ombudsman case of Kenny emphasised a pragmatic approach to estoppel and the Ombudsman introduced an additional requirement of good faith. In this case the pension was 64% larger than it should have been and so the complainant 'should have been aware that something was amiss'.
9.17 Section 5 of the Limitation Act 1980 provides that all actions founded on a simple contract must be commenced within six years from the date when the cause of action arises. Therefore, any action to recover the sum assured under a life policy which has not been issued under seal should be brought within six years of the happening of the event upon which the benefits under the policy are expressed to be payable. Normally, the sum assured under a life policy is payable only after proof, satisfactory to the life office, of the death of the life assured and title to the policy (or simply title to the policy on maturity of an endowment assurance or surrender of a life policy) has been provided. As the proof required by the life office relating to death and title are wholly within the power of the claimant the operation of the Limitation Act 1980 is not suspended in the meantime. However, where an action is based on fraud or mistake the period of limitation only begins to run when the fraud, concealment or mistake is discovered, or could with reasonable diligence have been discovered.
The relevant period during which an action must be brought is 12 years in the case of policies issued under seal.
9.18 If, in the opinion of the board of directors of a life office, no sufficient discharge can be obtained in any other way, the life office may pay the policy moneys into court under the Life Assurance Companies (Payment into Court) Act 1896. The procedure for doing this is set out in Part 37 of the Civil Procedure Rules 1998 (Practice Direction – Miscellaneous Provisions about Payment into Court, paras 4 and 5). An office wishing to make payment into court must file an affidavit or witness statement made by its secretary or other authorised officer. The receipt or certificate of the proper officer of the court is a sufficient discharge to the life office for the moneys paid into court. Payment may not be made into court under the Act if any other action is pending in England in relation to the policy unless the court gives leave to do so. The office is required to give immediate notice of a payment into court to every person appearing to be entitled to the moneys or to have an interest in them. The life office cannot deduct from the policy moneys any costs of or incidental to the payment into court and must bear the costs of payment in.
By proceeding under the 1896 Act the life office obtains an absolute discharge against all claims present and future and not only, as in the case of interpleader proceedings, in respect of an existing conflict between rival claimants. Payment into court therefore offers a remedy when the office faces the problem that the person legally entitled or the person who has given notice of his equitable claim cannot be ascertained or traced or where, perhaps, the title is unclear or unsatisfactory. For example, the identity of an assignee is not clear from a deed of assignment. Where the office claims a charge or other interest in the policy moneys it should deduct the amount it claims, paying only the balance into court. Payment in of the whole amount may be taken as an admission by the office that it has no claim on the moneys in court.
The life office must bear the costs of payment in, unless it has agreed with the claimants that they will bear the costs. The office will not normally have to bear the costs of a subsequent application for payment out unless the original payment into court was not reasonable. The advantage to the life office is that it will avoid the cost of deciding the issue of entitlement as between competing claimants. Although possible, it should rarely be necessary to pay into court solely on the ground of the loss of policy documents unless conflicting claims to the policy are also being made and cannot be reconciled.
9.19 Where the life office could be sued in different countries (eg England and Scotland) payment into court in one action is not an absolute bar to proceedings in the other country. However, generally, if payment into court is made in the country in which the claim is payable, the court in the other country would not allow proceedings to continue until there had been an adjudication on the claim against the moneys paid in.
The Life Assurance Companies (Payment into Court) Act 1896 applies to Northern Ireland but does not apply to Scotland. The office faced there with competing claims on the policy may be able to raise an action of multiplepoinding in the Court of Session. This process is similar to interpleader proceedings in England. It is only available when the policy money has become payable and the office admits liability to pay to the person or persons entitled. The only interest of the life office must be that of obtaining a discharge and there must be conflicting claims to the proceeds (the 'fund in medio'). The procedure of multiplepoinding is not available where the inability to obtain a discharge arises from the inability to find a claimant or from some doubt as to the validity of the title produced by a sole claimant.
9.20 Policy proceeds arising on death are usually made payable when proof satisfactory to the life office has been submitted of the death of the life assured and of the title of the claimant. Death must be proved by such evidence as the life office requires but its demands for proof must not be unreasonable – which will be a question of fact in the circumstances of the particular case. It should be borne in mind that the life office is often being asked to pay out considerable sums of money hence it not being unreasonable to require a commensurate level of proof.
Death must be proved by:
(1) direct evidence, ie by the oath of some person present at the death (eg a doctor);
(2) death certificate, ie by production of a certified copy entry in the Register of Deaths or in some other public record which is admissible in evidence; or
(3) evidence of prolonged absence or other facts from which the fact of death may be properly inferred.
In practice proof is usually provided in accordance with (2) above.
Generally, where a death claim arises under a life policy, an official certificate of death (ie a certified copy of the entry of death in an official register) should be produced to the life office. A certified copy of an entry, made in the General Register Office and bearing the seal or stamp of that office is, under Section 34(6) of the Births and Deaths Registration Act 1953, sufficient evidence of death without any other proof of entry. In Scotland the relevant provisions are contained in the Registration of Births, Deaths and Marriages (Scotland) Act 1965. In Northern Ireland the provisions of the Births and Deaths Registration (Northern Ireland) Order 1976 are the governing provisions.
9.21 In practice an official copy death certificate issued by a local Registrar is normally accepted. Because of the ease with which it is possible to produce falsified reproductions of death certificates by photographic or similar means, copy death certificates should not be accepted. Furthermore, from January 2001 the position with regard to copy certificates (whether for death, marriage or birth) was clarified so that the Crown now assert copyright over such documents so that only originals can be used unless a licence is obtained. Where the age of the life assured has not been admitted and the age in the death certificate does not correspond with the life office's records, proof of age should be called for. This may be established by:
(1) direct evidence as to the date of birth;
(2) birth certificate, ie by production of a certified copy entry in the Registry of Births, or in some other public record of the birth which is admissible in evidence; or
(3) baptismal certificate (albeit that this is only evidence of the date and fact of baptism).
For certain policies, such as investment bonds with very little additional life cover, the age of the life assured is not important in terms of, for example, setting premium levels and so verifying age is likewise not so important.
In the case of jurisdictions outside of the United Kingdom, evidence may be provided by a certified entry in a foreign public register, the use of which is provided for by the Evidence (Foreign, Dominion and Colonial Documents) Act 1933 and the Oaths and Evidence (Overseas Authorities and Countries) Act 1963.
(1) circumstantial evidence, ie proof of facts from which a jury might reasonably infer the fact of death; or
(2) a presumption of common law arising from the life assured's disappearance and absence for seven years.
Where the life assured was also the policyholder, in order to obtain a Grant of Representation, it will be necessary for someone to apply to the district judge or registrar for leave (permission) to swear the death.
Leave to swear the death does not find as a matter of fact that the individual has died but is required in order to obtain a grant of representation where there is no direct evidence of death. The application to the High Court for leave to swear the death in these circumstances must be made only after the best possible enquiries and searches have been made amongst those who would be likely to hear of or from him if he were alive. The application must be accompanied by an affidavit which should include particulars of all policies on his life. Notice should be given to the life office. No order will be made until the life offices in question have been notified of the application. If the life office opposes the application and is successful it will get its costs, but the life office may find it difficult to argue against the declaration if it does not take part in the proceedings. In a court action it may well be sufficient if the party who alleges death simply calls the missing person's nearest relatives in the United Kingdom to give evidence that he was living here and disappeared more than seven years ago and that they have not heard from him or of him since he disappeared. The party alleging death must, however, show that reasonable enquiry has been made abroad if it was known that the missing person went or intended to go to a foreign country.
Where enquiries are made in respect of a missing person, rumours and reports may be heard from people who think they have seen him and due enquiries appropriate to the circumstances should be made. If, however, such rumours and reports are in fact without foundation, the fact that they have been received within the seven years does not prevent the presumption of death arising. Sometimes, a person disappears in circumstances which suggest that even if he were alive it would be unlikely that his relatives or friends would hear of or from him. There may be good reason why he would wish to disappear from the circles in which he moved previously. In such circumstances the presumption of death does not arise from the mere fact of seven years' absence without being heard of. The court will want further evidence.
9.23 Although death may be presumed after seven years' absence, there is no presumption of law as to the exact time of death within the seven-year period. So if there is a need to establish death at or before any particular time during the seven years (eg where a temporary assurance expired during that period) this must be proved as a fact by suitable evidence, eg by evidence of ill-health when he was last heard of. The position where the individual is in a 'persistent vegetative state' and would die but for a life support system can raise extremely difficult issues where, for example, such a state may persist persists beyond the termination date of a temporary insurance.
As mentioned in (1) above, if the life assured has disappeared, it is not always necessary to wait for seven years before his death can be proved. The circumstances surrounding his disappearance (eg if he was a passenger on a ship that went missing) may be such that a court may reasonably find as a matter of fact that the life assured is dead, and so an application for leave to swear the death may be made within the seven years. For example, in National Trust v Sterling a person was lost at sea who had been on the SS Titanic. In this case it was enough for an affidavit to be produced that the insured had been lost on board at the time of sinking and had not been seen among the survivors. In Bayes-Walker and another v Bayes-Walker and others the High Court declared that a missing person was to be presumed dead for the purposes of rights to a life insurance policy amongst other assets. The court applied the rebuttable presumption that a person is dead if those who would be likely to have heard news of him had not heard anything of him for at least seven years.
A case in this area which caught the public imagination was that of John Darwin who faked his own death in a supposed canoe accident in 2002. A death certificate was issued following leave to swear his death had been granted. This enabled his wife to claim under his life assurance policies.
No action can be brought against the life office where the life assured has disappeared until the personal representatives have completed their title by obtaining probate or letters of administration. The personal representatives are unable to do this until they have obtained leave to swear the death.
9.24 In cases of common disaster where it is likely that more than one application for leave to swear the death will emerge the Principal Registry will keep a record of all evidence accepted when the first application is granted for guidance in respect of subsequent applications, so that in such a case, enquiry should first be made to the Principal Registry. If passenger lists and evidence of death have been supplied to the Principal Registry by, for example, the shipping company or airline concerned then a circular may be issued listing the names of those who have died and no further evidence of death will be necessary and there will be no need for leave to swear the death. However, for disasters such as the World Trade Centre in New York destruction on 11 September 2001 and the tsunami in South East Asia on 26 December 2004, leave to swear the death in each case (in the absence of a death certificate) would be required in view of the difficulties in ascertaining the victims with complete accuracy.
If the courts of a foreign country where the presumed deceased was domiciled have made orders presuming his death and vesting his estate in the persons entitled, his death may (depending on the circumstances) be presumed without further evidence, but if there is only an order by the foreign court presuming the death but not vesting the estate, further evidence will certainly be required to show that the presumed deceased is in fact dead.
A life office will not necessarily be bound by an order for presumption of death made for some purpose other than that of obtaining a grant of representation, or even by an order of the Family Division giving leave to swear the death. It is still open to the office to defend proceedings against it either on the ground that there is no evidence of death or that there is no evidence of death before the date when the policy expired. But once the will has been proved or an administrator appointed, the office will then become liable to an action to enforce payment and may have to pay the costs of all subsequent proceedings. The life office may decide to pay the claim and if it emerges that the life assured is still alive it can seek to reclaim the money paid out on the basis of a mistake of fact although once payment has been made retrieving the funds may prove difficult.
In Scotland the Presumption of Death (Scotland) Act 1977, which repealed the Presumption of Life Limitation (Scotland) Act 1891, governs the position for presuming the death of a person who is thought to have died or has not been heard of for seven years in Scotland. The earlier statute did not apply to claims under life policies and the claimant had to prove the death as best he could. Under the 1977 Act, where a person, domiciled in Scotland (or resident there for a year prior to the action), is missing and is thought to have died or has not been known to be alive for a period of at least seven years then any person having an interest may raise an 'action of declarator' of the death of the missing person.
9.25 If two persons die in circumstances where it is uncertain which of them died first, the deaths are, for all purposes affecting the title to property, presumed to have occurred in order of seniority, and so the younger is deemed by Section 184 of the Law of Property Act 1925 to have survived the elder. Therefore, if the elder has by will left his property to the younger, the bequest will not lapse. Conversely, a bequest in a will from younger to elder will lapse. These provisions are subject to the Law Reform (Succession) Act 1995, under which the intestate's spouse must survive the intestate by 28 days in order to be entitled. This statutory presumption in Section 184 can be excluded by an express contrary provision in a will. This was the case in Re Guggenheim where the deceased had made a declaration to the effect that in the event of he and his wife dying simultaneously, or in circumstances where there was no evidence as to who died first, his wife should be deemed to have predeceased him.
The statutory presumption does not apply for the purpose of incidence of inheritance tax. In this case the persons are treated as having died at the same instant and their property as having devolved accordingly.
Hickman v Peacey
Four persons were killed when a bomb exploded in a small air raid shelter. There was no evidence to show whether any of them had survived the others. It was held that in the absence of such evidence it was uncertain which of them survived the other or others within the meaning of Section 184 and the Section applied. The fact that it appeared they had died simultaneously did not make the Section inapplicable.
Section 31 of the Succession (Scotland) Act 1964 provides that where two persons have died in circumstances indicating that they died simultaneously, or rendering it uncertain which survived the other (known in Scotland as 'common calamity'), then for all purposes affecting the title to property or claims to legal rights or the prior rights of a surviving spouse, (a) where the persons are husband and wife it shall be presumed that neither survived the other, and (b) in any other case it shall be presumed that the younger survived the elder, unless the elder has left a testamentary disposition containing a provision in favour of the younger if he survives the elder and failing the younger in favour of a third person, and the younger person has died intestate, in which case it shall be presumed for the purposes of that provision that the elder survived the younger. In Lamb v Lord Advocate etc it was held that no presumption arises for consideration if there is proof that one person survived the other and such proof is on a balance of probabilities.
9.27 With a life annuity, payment by a life office depends on survival. Evidence of continued existence may be requested to be certified by of a responsible independent person, or the annuitant himself.
Normally life annuity payments are made directly to the bank account of the annuitant. Evidence of survival may then be waived, on the understanding that the bank will inform the life office when it receives notice of the death of the customer. This obviously relies on the bank informing the life office appropriately and the bank would ordinarily exclude or seek to refuse liability for failure to do so. Although not ideal, it may be the most practical way to proceed given the administrative inconvenience to the life office in verifying the annuitant's continued existence.
This practice involves certain risks (eg that both husband and wife might be entitled to draw on the same account), but in practice the risk may be thought worth taking in the circumstances. Also, the life office should be able to recover amounts paid out in the mistaken belief that the annuitant is still alive.
(1) Claim on death.
(2) Claim on maturity (ie survival of term of endowment assurance).
(4) Part surrender or surrender of bonus.
(5) Conversion, eg to paid-up policy.
(6) Exercise of option.
9.29 Where the claimant is the person who effected the policy, and the life office has received no notice (formal or informal, legal or equitable) of a trust, assignment, insolvency or incapacity, the claimant should in general be required to produce the policy, and to sign a suitable form of request, discharge or authority for payment.
9.30 Where the life office has received notice of a trust, assignment or charge, it would normally call for production of the original deeds or documents relating to the title to the policy and examine them before it pays the proceeds to the claimant(s) or permits any other dealings with the policy. It would not normally be concerned with documents which evidence dealings with beneficial or equitable interests protected by trustees (but should concern itself with trustee dealings such as deeds of appointment and retirement of trustees), or with second or subsequent mortgages, but the proper course is to call for all documents of which notice has been received. Until it has examined them the office cannot be certain that they affect only the beneficial interests. In addition, the life office is not able to ignore equitable interests where, for example, it has actual or constructive knowledge that actions in connection with a policy will prejudice such an interest.
9.31 Life offices frequently have to decide what course of action to take where a claim is made (or other dealings are proposed) where the policy is stated to be lost or destroyed. In some cases, where the amount of money involved is modest the life office may take a pragmatic approach and simply make payment on request especially if payment is to be made to the account from which premiums were paid (although care needs to be exercised for joint accounts, trust policies, etc). Assuming the life office is not prepared to do this the following sets out the general position.
There are no statutory provisions relevant to the loss of life policies. The inability of the claimant to produce it or to account for it may amount to constructive notice to the life office of an equitable assignment or other dealings.
The loss of a life policy is not in itself normally a sufficient ground for payment into court under the Life Assurance Companies (Payment into Court) Act 1896, although the particular facts may sometimes justify this course. The life office can require proof of the loss and of the searches that have been made in order to rebut constructive notice of any other interest. The claimant may be asked to make a statutory declaration (under the Statutory Declarations Act 1835) before a commissioner of oaths as to the facts surrounding the loss. This should include a statement that there have been no dealings with the policy, if appropriate, or if not, the statement should give particulars of all such dealings. If the loss is reported after the death of the policyholder, his executors are unlikely to be aware of the circumstances of the loss and can usually do little more than assert that they cannot find the policy.
All potential searches for the lost policy should be made and it is sometimes possible for the life office from its records to indicate suitable directions for enquiries. For example, it can give the names of any firm of solicitors who have served a notice of assignment.
If all searches and enquiries fail, payment under a statutory declaration and/or an indemnity by the claimant may be appropriate. Executors and trustees may hesitate to give an indemnity, and in such cases the indemnity of one or more of the principal beneficiaries may be thought sufficient. Even more problematical is the situation where the claimants allege that it is the life office (or an adviser) which has lost the policy document or that the document has never been received. A claimant may legitimately question why he is being required to indemnify the life office in such cases.
With regard to indemnities the undertaking given by Abbey Life Assurance Company Ltd to the Financial Services Authority should be borne in mind (see9.5above)
9.32 Life offices tend to have standard forms for the purpose of statutory declarations and indemnities and they may require a full history of the policy, details of any dealings and the circumstances surrounding the disappearance and details of the searches for the policy.
It is unlikely that a life office can insist on an indemnity. If the matter went to court it is likely that the life office would be ordered to pay out, and the court order would be sufficient indemnity, but in view of the costs involved this must be viewed as an extreme measure for a life office to take in order to obtain a discharge.
If the policy was assigned as security for the repayment of a loan, there should be a reassignment on the loan being repaid in which case production of the reassignment will be sufficient evidence for the life office to be able to pay to the policyholder in the absence of any other indication that the policy has been assigned or otherwise dealt with. Failing this, a letter of disclaimer by the mortgagee or his personal representatives may be required.
9.33 In order to avoid claims under policies effected with a view to suicide, some life offices exclude death by suicide occurring within a specified period (usually 12 or 13 months). A few exclude suicide whilst sane at any time.
Suicide was (until 3 August 1961) a crime if committed voluntarily by a person of sound mind. It is contrary to public policy that a man should derive an advantage from his own criminal act and it followed that, until the law was altered, no benefit could have been taken by the personal representatives of a person who committed the crime of suicide.
The Suicide Act 1961 abolished the rule that suicide was a crime. The position now is that the policy moneys will often become payable on the life assured's death by suicide. However, payment may still be excluded expressly or impliedly by the terms of the policy or under general insurance law principles as described below.
If there is no express reference to suicide in the policy then two results follow:
(1) It appears from the remarks of Lord Atkin and Lord Macmillan in Beresford v Royal Insurance Co Ltd that the life assured's personal representatives cannot recover if he commits suicide whilst of sound mind. This was on the ordinary principle of insurance law that a man cannot by his own deliberate act cause the event upon which the insurance money is payable. This is not the result of any rule of public policy but of a rule of construction of the contract, by which it is presumed that the insurers have not agreed to pay on that happening. In Beresford, Lord Atkin believed the life office could have resisted payment on the basis of public policy. Since the decriminalisation of suicide the public policy factor would no longer be relevant. Beresford's case would therefore now be decided differently as, in that case, the clause relating to suicide only prohibited payment on suicide during the first year of the policy and suicide occurred after the expiration of one year. So, if public policy was not a factor, the terms of the policy only excused payment in the first year. The general principle regarding payment not being made as the insured had brought about the event insured against was negated by the specific policy terms.
(2) This principle does not apply to suicide whilst insane and in that event the personal representatives can recover the sum assured.
Therefore, if the policy expressly deals with suicide (as in Beresford) one must look to the words of the policy to ascertain whether the sum assured is payable in that event. It may provide that suicide, sane or insane, is not covered at any time, or that it is not covered if it takes place within a limited period. If the life assured commits suicide after that period has expired, the life office would, on the construction of the policy, be liable even if he was then of sound mind because the express protection is limited to that period and the implication is therefore that the life office has accepted the risk after that time. The Court will, of course, normally give effect to a term wholly excluding suicide even if the life assured is insane at the time.
9.34 Where the life assured commits suicide and the sum assured is not payable either because of an exception in the policy or on general principles, the premium is not returnable, because there has not been a total failure of consideration. The life office has been on risk throughout to pay the sum assured on death from other causes.
The claimant is not normally required to disprove suicide. Unless there is evidence suggesting otherwise (the death certificate may or may not indicate that suicide was the cause), there is a presumption that death was accidental or natural. In seeking to resist a claim the burden of proof is on the insurer to prove suicide on the balance of probabilities.
Exclusion from payment on suicide potentially affects the value of a policy. This is of particular concern to an assignee or mortgagee. It is usual, therefore, to provide that in the event of suicide, whilst sane or insane, within the specified period (if any) the policy shall be valid to the extent of any interest acquired by a third party for consideration in money or money's worth. Such a clause has been upheld on the basis that it did not tend towards encouraging suicide and meant that the life policy was a safe security in the hands of the assignee. (See Moore v Woolsey and White v British Empire Mutual Life Assurance Co.) The life office itself will not usually be considered a third party although the precise wording of the clause must be considered. White v British Empire Mutual Life Assurance Co was distinguished in:
Royal London Mutual Insurance Society v Barrett
D borrowed from the life office on the security of a policy and leasehold property. The policy contained a suicide clause, but with the usual saving for 'the pecuniary interest of third parties bona fide acquired for valuable consideration'. D committed suicide. It was held that the life office was not a third party; that the policy was void; and that the life office could recover its debt against the leasehold property.
It would appear that a trustee in bankruptcy of the life assured would not be viewed as someone who had acquired an interest for value. Such interest arises solely through operation of law.
9.35 A person who has insured the life of another cannot benefit under the life policy if he murders the person whose life he has insured. Nor can he benefit in any other manner (ie other than as the assured under the policy). This is an application of the principle of 'ex turpi causa non oritur actio' (a right of action will not arise from a base cause) which was reaffirmed in the following case in the context of the Social Security Act 1975.
R v Chief National Insurance Comr, ex p Connor
The applicant had stabbed her husband with a knife and was convicted of manslaughter. The court, affirming the Chief National Insurance Commissioner, held that it was contrary to public policy to admit her claim to a widow's allowance under the Social Security Act 1975.
This rule (known as the 'forfeiture rule') does not, however, apply where the murderer is insane. The public policy which prevents a sane murderer recovering was held by the Industrial Assurance Commissioner to have no application when the perpetrator was insane.
The rule generally applies to manslaughter but its effect has been softened by case law and by statute. In Gray v Barr the rule which appeared to emerge was that if the person responsible for the death was guilty of deliberate, intentional and unlawful violence, or threats of violence then the rule of public policy applied. However, if the case in question fell outside of this ambit then the public policy provisions will not apply. But the precise extent of Gray v Barr is not entirely clear. An application of this principle can be seen in Re H (deceased) where it was found that the plaintiff could benefit under his wife's will where he had killed his wife but was found guilty of manslaughter on the ground of diminished responsibility.
Where the forfeiture rule applies it also bars all persons claiming through or under him such as his children. This was criticised by the Law Commission in Consultation Paper 172, 'The Forfeiture Rule and the Law of Succession', published on 16 September 2003. This resulted in a Law Commission report in 2005, 'The Forfeiture Rule and the Law of Succession' (Law Com No 295) which concluded that 'under our proposed reforms, the property will devolve in exactly the same way as if the killer had predeceased the victim'. In March 2011 a Bill was published ('Estates of Deceased Persons (Forfeiture Rule and Law of Succession) Bill') which would largely implement the Law Commission Report.
9.36 Statutory relief from the severity of the forfeiture rule was introduced in the Forfeiture Act 1982. In appropriate circumstances, this Act relieves persons guilty of unlawful killing from forfeiture of various rights such as inheritance, pensions and social security benefits. The Act does not apply to murder or suicide but could still apply to someone who assisted the deceased to commit suicide or to someone guilty of manslaughter. The Act gives the court a wide discretion to modify the effect and application of the forfeiture rule, but the court must take into account:
(1) the conduct of the offender;
(2) conduct of the deceased; and
(3) other material circumstances.
In the light of these the justice of the case must require the effect of the rule to be modified (Section 2(2)). Proceedings under the Act must be commenced within three months of the conviction.
In S (deceased), the plaintiff and his wife effected a joint lives first death endowment policy. He subsequently killed her but although charged with murder was ultimately convicted of manslaughter on the grounds of diminished responsibility. In the application under the Forfeiture Act the plaintiff sought an order that the policy proceeds should be paid into a trust for the sole benefit of the son. In agreeing to the application the following factors were emphasised:
(1) the plaintiff's responsibility was substantially impaired;
(2) the order was for the benefit of the son, not the plaintiff;
(3) no one else was interested in the policy proceeds.
The case of Dunbar v Plant involved a suicide pact in which only one of the participants died. The Court of Appeal held that the survivor was guilty of aiding and abetting the suicide and the forfeiture rule applied. In applying the test set out in Section 2(2) of the Forfeiture Act 1982 the court decided that, whilst there would be exceptions, the normal approach would be to grant full relief against forfeiture in the case of suicide pacts.
In Dalton v Latham the claimant was convicted of the manslaughter of the deceased and his sentence was six years' imprisonment. He applied to modify the forfeiture rule to enable him to benefit under the will on the basis that he had cared for the deceased. His application was refused as the court decided he had taken advantage of the deceased and the conviction for manslaughter rather than murder merely reduced his responsibility for the crime.
9.37 Where the life office may repudiate a claim on the grounds that the policyholder caused the loss by his own wrongdoing, then his personal representatives and all who claim a share of his estate as a beneficiary under his will or on intestacy, as a creditor, as a trustee in bankruptcy, or as an assignee, are equally barred from claiming. This extends also to the trustees of a trust declared by the policyholder of a policy effected on his life. However, the position is different where the rights in question are 'alternative or independent'. So, for example, enforcement of the policy by a mortgagee of the policy would be possible. In Davitt v Titcumb the right of a building society as mortgagee was in issue. A joint life policy was assigned to the building society and it was held that where one of the lives assured murdered the other the building society could still recover. However, the defendant was not to benefit, even indirectly.
To repudiate a claim on the basis of suicide or other wrongdoing, the life office must prove that the death was indeed caused by suicide or such other wrongdoing as appropriate.
9.38 The broad rule is that on death immovable property (ie all interests in land or 'real property') will pass to the person or persons who become entitled under the law of the country where the property lies (the 'lex situs'). Where property is abroad, consideration should be given to drawing up a separate will dealing solely with this property with the help of a local lawyer.
Conversely, for moveable property (ie 'personal property' (including life policies)) the general rule is that property will pass to the person or persons who become entitled under the law of the country in which the deceased died domiciled (the 'lex domicilii').
The question whether or not property is moveable or immoveable is decided by the lex situs.
Where the deceased dies domiciled in England, his real property in England and his personal property wherever situated therefore vest in the first instance in his personal representatives:
(1) where he has made a will and has appointed executors who accept office, this will be the executor or executors; and
(2) where he has died intestate, or where he has made a will but has not appointed executors or has appointed executors who do not accept office, this will be the administrator or administrators.
An interest in a life policy which the deceased held jointly with another person as joint tenant who survives him will pass not to the personal representatives of the deceased but by survivorship to the other person. It will pass to the survivor who will hold it either as absolute beneficial owner or as trustee for himself and the deceased's personal representatives. This will depend on whether the legal joint tenants beneficially owned the interest in question as joint tenants or tenants in common.
The above analysis regarding joint tenancies of life policies now needs to be considered in the light of the decision in Murphy v Murphy which surprised the authors and is not universally accepted. In particular, the judge at first instance and one of the judges in the Court of Appeal (Chadwick LJ) did not agree with the majority decision of the Court of Appeal. The position which appears to emerge from this case is that the death benefit under a jointly held temporary assurance policy constituted two separate interests rather than a joint tenancy capable of severance (which would have meant that half of the joint interest was potentially available for redistribution under the Inheritance (Provisions for Family and Dependants) Act 1975). It does seem clear that the decision was not intended to apply to non-temporary policies especially as the policy in question also contained an additional terminal illness benefit which was specifically stated not to be subject to separate interests.
9.39 An executor derives his title from the will and may act as such before obtaining probate (although a life office would naturally be reluctant to deal with an executor until probate had been obtained as they have no proof of his ability to act). Title will relate back (doctrine of 'relation back') to the testator's death once probate is granted. However, an administrator derives his title entirely from the grant of representation and has no power to do anything as administrator before letters of administration are granted to him. The title of the administrator usually relates back to the date of death of the deceased. However, this will only be the case if this would be beneficial to the estate from an objective point of view. Accordingly, relation back will not be allowed for the purpose of validating acts which were done before the grant with the subjective aim of benefiting the estate but which have not in fact benefited the estate at all.
No one is obliged to be an executor, but if a person shows an intention to act as executor, he must prove the will and act until the court releases him. A purported renunciation, before a grant of probate has been obtained, in order to purchase part of the estate may be void if the executor has already acted as executor (ie joined in some act of administration of the estate). In the case of Holder v Holder the plaintiff sought to have the sale to the defendant of certain farms rescinded on the ground that the defendant had acted as executor. Before probate was granted, the defendant had with the other executors opened an executors' bank account, paid money into it, signed cheques for sums totalling £600 drawn on and paid out of the account, endorsed insurance policies and instructed solicitors to act for the estate. He had then decided not to accept the executorship because he wanted to purchase two farms which were part of the estate to be administered. It was held that though technically the defendant had joined in acts of administration which meant that his renunciation of executorship was invalid, the sale should not be rescinded in view of the special circumstances of the case which included the fact that the defendant had not interfered in the administration of the estate and that the beneficiaries knew that the defendant was a potential purchaser and did not look to him to protect their interests.
Where a will appoints a minor to be an executor, the appointment does not operate to vest in the minor the estate of the testator, or to constitute him a personal representative for any purpose, unless and until probate is granted to him in accordance with the probate rules after he attains the age of 18.
If an executor has been appointed merely for a limited period, his powers will cease upon the expiration of such period.
(1) The testator (ie the person making the will) must be of full age and mental capacity.
(2) It must appear that the testator intended by his signature to give effect to the will (the old requirement for the testator to sign at the end of the will is no longer applicable) or by some other person in his presence and at his direction. The signature must be made or acknowledged by the testator in the presence of two or more witnesses, present at the same time, each of whom must sign or acknowledge their signature in the presence of the testator, but not necessarily in the presence of each other (although in practice it will be easier if they are all in each others presence throughout the signing and witnessing process).
(3) Any additional testamentary document, known as a codicil, must be similarly signed and witnessed.
A will may be revoked:
(a) by another will or codicil or a document signed and witnessed in the same way as a will, with the intention to revoke the earlier will;
(b) by destruction with the intention to revoke; or
(c) by marriage.
However, a will expressed to be made in contemplation of a particular marriage is not revoked by the occurrence of that contemplated marriage. In the case of Re Coleman, Coleman v Coleman, a will made in September 1970 gave gifts and devised the testator's freehold house 'unto my fiancée' and disposed of the residue for the benefit of others. In November 1970 the testator married his fiancée and died in November 1972. It was held that the construction of the document as required by Section 177 of the Law of Property Act 1925 failed to show that the whole of the will was made in contemplation of marriage (although certain clauses had been) and accordingly the will was revoked on the testator's marriage by virtue of Section 18 of the Wills Act 1837. However, doubts were expressed about this decision, perhaps most notably by the Law Reform Committee. Following the Administration of Justice Act 1982, the position now is that where it appears from a will that at the time it was made the testator was expecting to be married to a particular person and that he intended that a specific disposition in the will should not be revoked by that marriage, that disposition takes effect despite the marriage. Furthermore, any other disposition takes effect also, unless it appears from the will that he intended it to be revoked by the marriage. Effectively, this extends the concept to individual dispositions and not necessarily the will as a whole so the result in Coleman would be different if decided today.
Section 18A of the Wills Act 1837 (inserted by the Administration of Justice Act 1982, Section 18(2)) dealt with the effect of divorce on wills. It provided that any appointment of the former spouse as executor be deleted and that any gift to that spouse be treated as having lapsed. The unfortunate effect of providing that the gift 'lapsed' was evident in the case of Re Sinclair with the ultimate result being that Mr Sinclair's brother benefitted at the expense of the Imperial Cancer Research Fund whereas if the wife was treated as having predeceased the gift over to the charity would have survived. Subsequently, the Law Commission presented a report in September 1983 which was eventually enacted as Sections 3 and 4 of the Law Reform (Succession) Act 1995. Essentially, this provides for the former spouse to be treated, in most cases, as having predeceased the testator. In particular, the substituted Section 18A(1)(b) negates the effect of Sinclair.
A soldier, sailor or airman (such terms being given a wide meaning) on active service or a mariner or seaman at sea may, whether or not of full age, make a valid will; and such a will need not be witnessed with the formalities required in the case of a civilian. It may even be made by word of mouth.
9.41 Property vested in trustees is held by them in joint tenancy and on the death of one of them vests in the survivor or survivors but, of course, still subject to the trusts. If there is a sole trustee or a sole surviving trustee, then on his death where the trust property is real property it vests in his personal representatives despite any provision in the trustee's will or in the instrument creating the trust. The position with personal property is not specified although it is clear that the personal representatives may either carry on the trust or appoint new trustees in their place; but, if there is a person nominated by the trust instrument to appoint new trustees, then he has priority in making an appointment ahead of the personal representatives.
Where there has been a change of trusteeship by, for example, appointment or retirement then the trustees would normally be required to produce evidence of this by production of the relevant deeds, etc.
9.42 A grant of representation will be issued by the Principal Registry of the Family Division, or by a District Probate Registry or a sub-registry, to evidence the title of the personal representatives to administer the estate of a deceased person where that person is domiciled in England and Wales at the time of his death.
Such grants are essentially of two kinds (although either may be limited in some way):
If the claimant does not wish to employ a solicitor, he can apply personally for a grant at any registry or sub-registry. He will have to produce a death certificate or such other evidence of the death of the deceased as the registrar may approve, and supply all information necessary to enable the papers leading to the grant to be prepared in the registry.
Every application must be supported by an oath made by the applicant (and such other person as the registrar may require) which must state certain information, for example, that the document of which probate is to be granted is the true and original last will of the deceased and must prove the marking of the will (ie the signatures of the applicant and the person before whom the oath is sworn), the name and last address of the deceased and the date of death.
In addition the personal representatives must deliver to the Commissioners for Her Majesty's Revenue and Customs an account specifying to the best of their knowledge and belief all appropriate property for inheritance tax purposes and the value of the said property. A grant of representation will not be made until such an account has been produced and any inheritance tax payable has been paid. There are exceptions from having to provide a return for 'excepted' estates which, in this context, essentially means estates below the inheritance tax threshold (or 'nil-rate band').
9.43 The executors derive their title from the will and not from probate, and acts done by them before probate are binding on the estate. However, although they can begin an action as executors before probate they cannot proceed beyond the stage at which it becomes necessary to prove their title until probate is granted.
Probate is prima facie evidence that the will is valid, that it is the last will and also that any inheritance tax payable has been paid.
Where more than one executor is appointed, probate is sometimes granted to one or more of them, power being reserved to the others to come forward later and obtain a grant. Until that occurrence persons may safely deal with the executor(s) to whom probate has been granted. If a later grant is obtained it is called 'double probate'.
Any executor may decline to act if he so wishes. In such a case he is said to renounce probate.
The High Court has confirmed that the balance of probabilities is the standard of proof required to admit a lost will to probate.
9.44 If the deceased has: (i) appointed executors who have predeceased him or who are unable or unwilling to act, or (ii) has appointed no executors, or (iii) has died without leaving a will, then letters of administration may be granted. There is a recognised order of priority in which persons may apply for a grant in such cases. The person entitled to the grant has no title to act before the grant is made (except for matters of humanity and necessity) but when the grant has been made his title usually 'relates back' to the death.
The following are examples of types of letters of administration:
(a) Administration with the will annexed ('cum testamento annexo'). Where there is a will but no available and willing executor. The court cannot appoint an executor and so it must grant letters of administration with the will annexed.
(b) Administration pending suit (pendente lite). Where legal proceedings are pending as to the validity of a will or obtaining or revoking any grant of representation. Often the grant is made to someone who is considered to be indifferent to the contesting parties.
(c) Administration during mental incapacity. Where the only executor is incapable of managing his affairs by reason of mental incapacity the district judge or registrar may grant a limited administration to specified persons. Or where there are other executors a grant may be made to them with power reserved to the mentally incapable executor.
(d) Administration de bonis non administratis. Where a sole or last surviving executor has died intestate, or without executors (so that the 'chain of representation' is broken) or where a sole or last surviving administrator has died; in both cases before the estate is fully administered. The courts grant administration to a new representative for the purpose of completing the administration.
(e) Administration for the use and benefit of a minor ('administration durante minore aetate'). This is a grant, limited as to time, which is made to an adult when (1) the person, or all the persons, entitled to administration is, or are, under age; or (2) the person appointed sole executor is a minor.
(f) Administration ad colligenda bona. Where there is delay in obtaining a grant with the result that the preservation of the estate is put at risk, an application may be made for an order for a grant of letters of administration ad colligenda bona. Unlike an ordinary executor or administrator, someone with such a grant cannot make any distribution of the assets. His role is to protect the assets until a proper grant can be made.
9.45 A cessate grant is granted when a testator has directed that on the happening of a certain event, some other person is to be substituted for the original executor and that particular event occurs. A cessate grant will also be granted for a person who has taken a grant for the use and benefit of a person under disability (eg a mentally disordered person or a minor) until removal of the said disability.
9.46 Probate may be granted in common form or solemn form. Proof of a will in solemn form follows a court action, and is granted in cases where the validity of the will is open to question, or where there is a likelihood that it may be opposed.
9.47 One of several personal representatives can give a life office a good discharge, but it is usual to ask for the signatures of all the executors who have proved the will, or all the administrators, as appropriate. Moreover, if the administration of the estate is complete and the executors have become trustees under a trust in the will, the receipt of all the trustees would generally be required.
9.48 Any 'intermeddling' with the deceased's assets by a person who is not an executor or administrator makes him accountable and he could potentially be sued by the rightful executors, administrators, beneficiaries or creditors. 'Intermeddling' essentially means an action carried out in relation to an estate which a personal representative would carry out but where that person is not entitled to that role and does not wish to act as such. He is called an executor de son tort ('de son tort' means 'of his own wrong').
9.49 A life office is sometimes asked to pay without a grant but unless it has special power to do so, either in the policy or through its constitution, such a request should generally be treated with great caution, as it might later be found, for example:
(1) that if an unproved will is produced to the office, it is invalid, or even a forgery, or is not the last will;
(2) that the deceased left a will though the claimant is not aware of it;
(3) that the claimant has not paid the debts and funeral expenses, in which a case a creditor can obtain a grant and compel payment;
(4) that the life office (or others who 'intermeddle' with the estate assets) is liable for inheritance tax as though it was an executor.
An exception may sometimes be made for pragmatic purposes where the value of the policy and the estate are small and where there is little or no risk of insolvency, or of liability to tax or of dispute between rival claimants. The decision for the life office may be easier where there is an unproven will and/or the deceased left a widow(er). Sometimes life offices adhere voluntarily to certain unrelated statutory provisions which permit other types of assets such as national savings up to a limit of currently £5,000 to be paid without a grant of representation. The life office may impose its own requirements, for example, a maximum amount in excess of which it will not pay out. It should bear in mind its 'Treating Customers Fairly' obligations and not put in place unreasonable requirements. For example, the FSA defined consumer ", although as the life office may be faced with the possibility of having to pay out twice it is not unreasonable to put in place proportionate requirements. Where the policyholder dies intestate and does not leave a widow(er), the life office might have particular difficulty in determining who to pay the money to, for example, as yet unknown children from other relationships would be entitled to share in the estate. A grant of representation may be advisable in this case.
9.50 Where one of two or more executors dies, whether before or after obtaining probate, the survivor(s) can act or continue to act, and so can the last survivor of them. The executors of the last survivor represent the original testator (on the basis that the last survivor proved the will) and so on, in what is known as the 'chain of representation'.
The effect of Section 7 of the Administration of Estates Act 1925 is as follows:
(1) An executor of a sole or last surviving executor of a testator is the executor of that testator.
The provision does not apply to an executor nominated as such in the will who does not actually prove the will of his testator. Also, in the case of an executor who on his death has not proved the will, the rights of that executor cease and the representation to the testator and the administration of his estate devolve in the same way as if the executor had never been appointed as such.
(2) So long as the chain of representation is unbroken, the last executor in the chain is the executor of every preceding testator.
(3) The chain of representation is broken by:
(a) an intestacy;
(b) the failure of a testator to appoint an executor; or
(c) the failure to obtain probate of a will;
but is not broken by a temporary grant of administration if probate is subsequently granted.
(4) Every person in the chain of representation to a testator effectively stands in the shoes of the original executor.
In any case where the chain of representation is broken before the administration is complete, it will be necessary to obtain letters of administration de bonis non administratis in order to complete the title.
9.51 There are two types of grant, the confirmation nominate and the confirmation dative. The confirmation nominate is granted where there is a will. Where there is no executor nominate appointed by the will, the Executors (Scotland) Act 1900 provides that the following persons will be deemed to be the executors nominate: the testamentary trustees failing whom, those legatees to whom the whole or the residue of the estate has been bequeathed. The confirmation dative is granted where there is no will. The court will appoint an executor dative in accordance with a recognised order of priority.
A Scottish grant gives power to collect only the property specified in a schedule (the inventory) attached to the grant; and if the executors subsequently discover additional assets, they have to obtain a further grant known as an eik. Where one of two or more executors dies, the survivor or survivors can act, but not the executors of the last survivor. There is no chain of representation as there is in England.
9.52 The Administration of Estates Act 1971 abolished the necessity for a grant made in Scotland or Northern Ireland to be resealed in England before English assets could be collected. The Act provides that where a person dies domiciled in Scotland or Northern Ireland, the local grant of representation (provided it notes his Scottish or Northern Irish domicile) is treated as a valid grant in England, without any need for resealing. There are reciprocal provisions validating English grants in the other parts of the UK.
9.53 Where a person dies domiciled abroad, the persons entitled must, as a general rule, obtain an English grant before they can collect his English assets; but there is an exception in the case of life policies, under Section 19 of the Revenue Act 1889, which amends Section 11 of the Revenue Act 1884, as follows:
'Provided that where a policy of life assurance has been effected with any insurance company by a person who shall die domiciled elsewhere than in the United Kingdom, the production of a grant of representation from a court in the United Kingdom shall not be necessary to establish the right to receive the money payable in respect of such policy.'
The United Kingdom does not include the Isle of Man or the Channel Islands.
Where Section 19 applies, payment can be made on evidence of domicile and production of the appropriate documents identifying the person entitled to collect the policy moneys under the law of the country of domicile. If required by the life office, the claim should be supported by evidence of the validity of the grant and, where necessary, by evidence of the law of the country of domicile.
Haas v Atlas Assurance Co Ltd
H was the testamentary executor by Swiss law of a man who had effected policies on his life with an English life office and died domiciled in Switzerland. H H was entitled to claim payment without an English grant.
Section 19 of the Revenue Act 1889 concerns the requirements to establish title to the proceeds of a policy rather than liability for duty or tax on policies. Therefore, where the policy is a United Kingdom asset of the foreign domiciled policyholder, the life office should satisfy itself that any inheritance tax liability in respect of the policy has been discharged before payment of the proceeds otherwise the office may become accountable for the tax. Therefore, in practice the life office may well still seek the production of a grant of representation.
9.53a Section 200(1)(c) of the Inheritance Tax Act 1984 makes any person in whom the relevant property is vested at any time after the death liable for any inheritance tax payable, and this is so whether or not that person is beneficially entitled to the property. For this purpose, the meaning of the word 'property' is extended by Section 200(4) of the 1984 Act to include any property directly or indirectly representing the original property. It may be argued that the 'property' of a life policy is the right to sue the office in respect of its obligation to pay a sum of money and that this 'property' is never vested in the life office but it would clearly apply to the proceeds of such a policy. The life office may also be liable for inheritance tax if it has received notice that the policy in question is subject to a statutory charge for tax under Section 237 of the 1984 Act.
9.54 A life office may also be liable for inheritance tax where it has made a payment without the production of an English grant of representation or not in accordance with the provisions of Section 19 of the Revenue Act 1889. The life office may be held to have intermeddled with the policy proceeds so as to become liable as though it was an executor. The policy proceeds are then deemed to have vested in the life office so that it becomes liable for the inheritance tax payable.
The following case may assist in understanding the meaning of intermeddling:
IRC v Stype Investments (Jersey) Ltd
In February 1979, Sir Charles Clore made a Jersey settlement of the shares in Stype Investments (Jersey) Ltd. In May 1979 he conveyed to that company an estate in Hertfordshire on terms that it should be held by the company as bare nominee for him. Shortly afterwards, he directed the company to sell the estate and completion was fixed for September 1979. Sir Charles died in July 1979. The sale proceeds were subsequently received by the company and transferred to its account in Jersey. The Inland Revenue sought to serve process on the company in Jersey, alleging that it had 'intermeddled' with Sir Charles' property so as to become liable for capital transfer tax (the forerunner of inheritance tax) under Section 25 of the Finance Act 1975. It was held by the Court of Appeal that the conduct of the company in relation to receipt of the proceeds of sale of the estate constituted an intermeddling with the estate and so the company was an executor de son tort and therefore within Section 25.
9.55 A person's domicile is a different legal concept to residence or nationality (although a person may be domiciled and resident in, and a national of, the same country). Domicile is a matter of fact. A person's domicile is the country where he either has (or is deemed by law to have) his permanent home, although he may be resident in some other country for other purposes.
Formerly, a woman acquired the domicile of her husband on marriage, and it changed with his throughout the marriage. Section 1 of the Domicile and Matrimonial Proceedings Act 1973 provided that the domicile of married women, after 1 January 1974, is ascertained in the same way as for men . But a woman married before 1974 retains her husband's domicile until she acquires another.
A woman married before the 1973 Act and acquiring her husband's English domicile by dependence, has to retain it as her domicile of choice while she continues to live with him, even though she intends ultimately to return to her domicile of origin. Although the purpose of the 1973 Act was the abolition of the wife's dependent domicile, a woman married before 1974 wishing to revive her domicile of origin has not only to have an intention to cease living permanently in England but has also to take up residence permanently in another country, leaving her husband if necessary. See IRC v The Duchess of Portland.
A person's domicile of origin is that of his father, except that a child posthumous to the father or a child born to unmarried parents takes the domicile of his mother. His domicile may change to that of his mother if his parents are separated and he lives with her; and unless he goes back to live with his father, her domicile will in effect then become the child's domicile. After age 16, a person may acquire an independent domicile of choice, but his domicile of origin will be restored if the domicile of choice is abandoned and a new domicile of choice is not immediately required. The domicile of origin is never therefore entirely lost. To acquire a domicile of choice it is necessary to reside in the country of choice, but residence alone is not sufficient, however long continued – there must also be the intention to remain permanently. It is necessary to show a clear unequivocal intention to remain in the country of choice permanently. There must be convincing evidence before a court will hold that a new domicile has been acquired.
For inheritance tax purposes a person will be deemed to be domiciled in the UK at the time of the transfer/death if:
(1) he was domiciled in the UK within the three years immediately preceding the transfer/death; or
(2) he was resident in the UK in not less than 17 of the 20 years previous to the date of transfer/death.
9.56 Under the Colonial Probates Act 1892, extended by the Colonial Probates (Protected States and Mandated Territories) Act 1927, and various Orders in Council, grants may be resealed in England if made by courts in certain countries which have generally been at some time British possessions, protected and trust territories.
When a grant of representation is obtained in a country to which the Act applies, and is then subsequently resealed in England, it will have the same effect as if it had been granted in England. The person who obtained the grant will have the same powers and duties as any person to whom a grant of representation was granted in England.
Section 109(1) and (2) of the Supreme Court Act 1981 (now renamed the Senior Courts Act), as amended by the Finance Act 1984 provides that an applicant for a grant or the resealing of a grant issued outside the UK is required to deliver an account for inheritance tax and pay any inheritance tax.
9.57 The executor or administrator must first ascertain the assets and liabilities of the deceased. On his application for probate or letters of administration he must generally first pay inheritance tax on the net value of the deceased's estate after deduction of the liabilities payable out of it, and must swear that he will administer the estate according to law and render a true account whenever required by law to do so.
When the executor or administrator has obtained probate or letters of administration, he can collect, or establish his title to, the assets and pay the funeral expenses (where appropriate), debts, and any further inheritance tax. (The personal representatives may discover during the course of the administration that the deceased owns other assets which were not initially taken into account when calculating the inheritance tax payable.) The executor or administrator must then deal with the remainder of the property in accordance with the will or the law of intestate succession as appropriate. The rules relating to intestate succession also apply to any property which is not disposed of by the testator's will. This would be a 'partial intestacy'.
9.58 Where, on or after 1 December 1993, a person dies intestate, the law governing the succession to his property is to be found in Schedule 1 to the Intestates' Estates Act 1952 which conveniently sets out the appropriate Sections of the Administration of Estates Act 1925 (as amended) but has itself been amended by Section 1 of the Family Provision Act 1966 and by orders made under that Act, the latest being the Family Provision (Intestate Succession) Order 2009. The position is summarised in the table below. These rules only apply where the deceased dies domiciled in England. For the Scottish law of intestate succession reference should be made to the Succession (Scotland) Act 1964 (as amended) summarised later in this Section, and for Northern Irish law, to the Administration of Estates Act (Northern Ireland) 1955 and orders made under that Act, such as the Administration of Estates (Rights of Surviving Spouse or Civil Partner) Order (Northern Ireland) 2007.
While a decree of judicial separation is in force, the separated spouses are not entitled to any rights of intestate succession in each other's estates – by Section 18(2) of the Matrimonial Causes Act 1973 the property will devolve as if the other party to the marriage had then been dead.
If the intestate and the spouse of the intestate die in circumstances where it is uncertain which of them survived the other then Section 184 of the Law of Property Act 1925 (under which the younger is deemed to have survived the older) does not apply and so the younger does not take on the intestate's death
Where the intestate dies on or after 1 January 1996, then in order to take any beneficial interest on his intestacy, his spouse must survive by 28 days (see Section 1(1) of the Law Reform (Succession) Act 1995, which inserts a new subSection (2A) into Section 46 of the Administration of Estates Act 1925).
Where the intestate leaves
Interest or share of estate taken
(1) a husband or wife, but
(a) no issue (ie children, grandchildren and other lineal descendants), and
(b) no parent or brother or sister of the whole blood, or issue of a brother or sister of the whole blood
The surviving husband or wife takes the whole estate absolutely
(2) a husband or wife and issue (whether or not persons mentioned in (1)(b) above also survive)
The surviving husband or wife takes:
(i) the personal chattels (ie personal property)
(ii) the remainder up to £250,000 free of inheritance tax and costs with interest up to payment or appropriation. The residue (if any) is held:
(a) one half upon trust for the surviving husband or wife for life and thereafter on statutory trusts (see below) for the issue
(b) the other half on statutory trusts for the issue
(3) a husband or wife and one or more of the following, ie parent, brother or sister of the whole blood or issue of brother or sister of the whole blood but no issue
The surviving husband or wife takes:
(i) the personal chattels
(ii) the remainder up to £450,000 free of costs and inheritance tax with interest up to payment or appropriation
(iii) one half of the residue (if any).
The other half is taken by the parents and if more than one in equal shares or if no parent survives then it is held on statutory trusts for brothers and sisters of the whole blood or their issue (that is, nephews and nieces).
(4) issue but no husband or wife
The whole estate is held on statutory trusts for the issue
Where the intestate leaves no husband or wife and no issue, the distribution is as follows. (If any member of one class survive, those in a subsequent class cannot benefit):
Relatives surviving at death of intestate
Interest or share of estate taken
The whole and if more than one in equal shares (not on statutory trusts)
Brothers and sisters of the whole blood (or their issue)
The whole on the statutory trusts
Brothers and sisters of the half blood (or their issue (where deceased and beneficiary had one common parent))
The whole on the statutory trusts
The whole and if more than one then equally (not on statutory trusts)
Uncles and aunts of the whole blood (or their issue)
The whole on the statutory trusts
Uncles and aunts of the half blood (or their issue)
The whole on the statutory trusts
and if no relative takes an absolute interest
The Crown, Duchy of Lancaster, or Duke of Cornwall takes the whole as bona vacantia
9.60 Where a surviving husband or wife takes a life interest in part of the intestate's estate and elects to do so (within 12 months of the grant of representation unless the court extends this period), he or she is entitled to have it purchased or redeemed by the personal representatives for a capital sum. The capital sum is calculated by reference to article 3 of the Intestate Succession (Interest and Capitalisation) Order 1977.
In addition, where the estate includes an interest in the matrimonial home , he or she may require (again within 12 months of the grant of representation unless the court extends this period) the personal representatives to appropriate that interest in or towards satisfaction of any absolute interest taken by the survivor, including the redemption value of a life interest.
Where there is a partial intestacy, the statutory legacy to be taken by the surviving spouse is reduced by the value at the death of any beneficial interests (other than personal chattels specifically bequeathed) acquired under the will of the deceased.
An adopted child is treated as the child of the adopter (and not the child of any other person) for purposes of distribution on the death of an intestate after the date of the adoption order. Under the Family Law Reform Act 1987, illegitimate children have the same right to share in their relatives' estates as if they were legitimate. However, where an illegitimate child dies intestate, it will be presumed that he was not survived by his natural father, or any person related to him only through his natural father, unless the contrary is shown.
(a) For issue. In equal shares for the children who attain the age of 18 or marry. If any of those children predecease their parent(s), the children of that deceased child will take the deceased child's share per stirpes (ie they take in equal shares the share to which the deceased child would have been entitled).
(b) For persons other than issue. In equal shares for members of the class who attain the age of 18 or marry. If any of these members predecease the deceased, the children of the deceased member will take the deceased member's share per stirpes.
9.62 In Scotland the surviving spouse and issue of the deceased have legal claims against that person's estate, which take precedence over other claims on intestacy and which, with certain qualifications, cannot be defeated by testamentary disposition. These claims are known as 'legal rights'. They are not strictly rights of succession, but are more in the nature of debts, arising and being fixed at the moment of death, vesting on death and requiring to be satisfied out of the net moveable estate before any other part of the estate can be distributed.
The common law entitlement to 'legal rights' was modified to some extent by the Succession (Scotland) Act 1964 and by subsequent legislation. Where a person has died after 10 September 1964, either totally or partially intestate, the 'legal rights' rank after statutory 'prior rights' as extended by that Act. However, prior rights do not have the characteristic of legal rights in that legal rights prevail against a contrary testamentary disposition. A beneficiary must elect whether or not to claim his or her legal rights and cannot claim both legal rights and entitlement under the will.
The rules of intestate succession operate only on the residual part of the deceased's estate which is not required to satisfy prior rights and legal rights. The legal rights are as follows:
(1) Jus relictae: the right of a widow to one-third of her husband's moveable estate (essentially anything other than land) if he leaves any issue entitled to legitim (see below for definition); or to one-half if he leaves no such issue, or if all claims to legitim were discharged in his lifetime. The fund subject to the widow's claim consists of the free moveables net of debts, expenses and any deduction for prior rights.
(2) Jus relicti: the equivalent right of a widower in his deceased wife's estate.
The same provisions now apply for civil partners.
(3) Legitim: the right of children (including illegitimate and adopted children and the surviving issue of deceased children who would have had a claim had they survived) to one-third of the net moveable estate if there is a surviving spouse claiming legal rights; or to one-half if there is no surviving spouse or if his or her claim has been discharged.
Where all the persons entitled to claim legitim are in the same degree of relationship to the deceased (eg if they are all children of the deceased), the division is on a per capita basis (ie they all receive an equal share). Where the persons claiming legitim are in differing degrees (eg if some are children and some are issue of a deceased child) then the division is per stirpes at the level of the nearest degree of relationship to the deceased in which there are surviving members (so a sole grandchild would be entitled to the share his parent would have received and if there are two or more grandchildren of the same parent then they are entitled to an equal share of what their parent's share would have been).
9.63 In calculating the shares of legitim, any advances of moveable property made by the deceased during his lifetime to claimants on the fund must be collated. This is similar to the old hotchpot rule under English law. The amount of such advances must be added back to the legitim fund which is then divided with the amount of the advances being deducted from the share falling to the person to whom they were made.
Legal rights of spouses may be discharged in their lifetime by marriage contract. However, nothing in such a contract executed after the commencement of the Succession (Scotland) Act 1964 may exclude rights to legitim unless the child or issue entitled, being sui juris, consents. A spouse or child may also renounce legal rights.
Formerly, any bequest or other testamentary provision for a surviving spouse or child was additional to any legal rights, unless declared to be given in satisfaction of legal rights and so accepted. But testamentary dispositions executed after the commencement of the Succession (Scotland) Act 1964 which do not contain such a declaration have effect as if they did contain such a declaration, in the absence of express provision to the contrary.
9.64 As from 1 June 2005 the statutory prior rights of an intestate's surviving spouse are as follows:
(1) If the intestate's estate includes an interest as owner or tenant in a dwelling house in which the surviving spouse was ordinarily resident at the intestate's death:
(a) where the value of the interest does not exceed £300,000 to the interest itself or in certain circumstances to its value instead; or
(b) in any other circumstances, to the sum of £300,000.
(2) If the intestate's estate includes the 'furniture and plenishings' of a dwelling house to which paragraph (1) above applies the surviving spouse is entitled to the whole of them if the value does not exceed £24,000, or in any other case to such part not exceeding £24,000 as the surviving spouse may choose.
(3) The surviving spouse is entitled to a sum of money – £42,000 if the intestate is survived by issue and £75,000 if not; in either case with interest at a specified rate from the date of death to the date of payment. However, if the surviving spouse, in the case of a partial intestacy, is entitled to a legacy (other than of property to which (1) or (2) above applies) then he or she is entitled only to the excess of the £42,000 or £75,000 over the legacy. This monetary amount is borne proportionately by heritable (essentially land) and moveable property.
9.65 Under the 1964 Act, an intestate's estate, net of prior rights and legal rights, devolves as follows. If there is any person in one group then no-one in a subsequent group may benefit:
(1) children (includes adopted children and the issue of predeceasing children);
(2) a parent or parents and brothers and sisters; half to the parents, half to the brothers and sisters;
(3) brothers and sisters (or their issue) (brothers and sisters of the whole blood exclude those of the half blood);
(4) a parent or both parents;
(5) the surviving spouse;
(6) uncles or aunts, irrespective of whether they are on the paternal or maternal side;
(7) grandparent or grandparents;
(8) brothers and sisters of any of the grandparents; or
(9) ancestors of the intestate, generation by generation successively, without distinction between paternal and maternal lines, the brothers and sisters of any ancestors having right before ancestors of the next more remote generation;
(10) The Crown.
References above to brothers and sisters include those of the half blood only if none of the whole blood are entitled.
If any person (other than a parent or spouse of the intestate), who would have been entitled had he survived, predeceases the intestate leaving issue who survive the intestate, then those issue take the whole or part to which the deceased person would have been entitled. If any person, who would have been entitled had he survived, predeceases the intestate leaving no issue who survive the intestate, then any other person who is also entitled takes his share and if there are more than one then the intestate's share will be divided equally between them if they are all related in the same degree to the intestate (for example, brothers and sisters) and per stirpes (for example, children of a deceased child taking in equal shares the share that the child would have taken had he survived) in other cases.
9.66 (Northern Ireland) 1955 and in various orders made under that Act, the latest being the Administration of Estates (Rights of Surviving Spouse or Civil Partner) Order (Northern Ireland) 2007.
The following table sets out the position in Northern Ireland:
Where the intestate leaves
Interest or share of estate taken
(1) a husband or wife, but
(a) no issue, and
(b) no parent or brother or sister or issue of a brother or sister
The surviving husband or wife takes the residuary estate absolutely
(2) a husband or wife and issue (whether or not parents, brothers or sisters survive)
The surviving husband or wife takes:
(a) the personal chattels
(b) the remainder up to £250,000 free of costs, with interest at the specified rate up to payment.
The residue is distributed as follows:
(i) Where only one child of the intestate survives, as to one half to the surviving husband or wife and as to the other half amongst the issue equally per stirpes.
(ii) Where more than one child survives, as to one third to the surviving husband or wife, and as to the residue amongst the issue equally per stripes.
If a child of the intestate predeceased him leaving issue who survive him, the surviving spouse of the intestate takes the same share as if the child had survived.
(3) a husband or wife and one or more of the following, namely parent, brother or sister or issue of brother or sister but no issue
The surviving husband or wife takes:
(a) the personal chattels
(b) the remainder up to £450,000 free of costs with interest at the specified rate up to payment
(c) one half of the residue.
The other half of the residue is taken by the parents and if more than one in equal shares, or if no parent survives, by brothers and sisters or their issue equally per stirpes.
(4) issue but no husband or wife
The whole estate is distributed amongst the issue equally per stirpes
Where the intestate leaves no husband or wife and no issue, the distribution is:
Relatives surviving at death of intestate
Interest or share of residue taken
The whole in equal shares
Brothers or sisters or issue of deceased brothers or sisters
The whole estate in equal shares per stirpes
If the intestate leaves no husband or wife, issue, parent, brother, sister or issue of a deceased brother or sister, his estate is distributed to grandparents or if none are living then to uncles and aunts (the surviving issue of deceased uncles and aunts taking their parents' share per stirpes). If no person takes under the foregoing provisions, the estate passes to the Crown as bona vacantia.
Unlike the position in England, brothers and sisters and other relatives of the half blood are treated in the same way as and inherit equally with relatives of the whole blood in the same degree.
The references to 'spouse' in the above intestacy provisions now includes references to registered civil partners under the Civil Partnership Act 2004.
9.67 The Family Law Reform Act 1987 provides, subject to any contrary intention, certain rules of construction. No reference needs to be made to the terms 'legitimate' and 'illegitimate' as the term 'children' will encompass both legitimate and illegitimate children. Sections 1, 18 and 19 have the effect of providing that illegitimacy will not be taken into consideration when determining an illegitimate person's rights of succession on intestacy or under a will or inter vivos disposition. It is, however, open to a testator or donor to specifically exclude illegitimate children if he so wishes. The term 'illegitimate' and its derivations are no longer used in statutory references. Section 21 of the Family Law Scotland Act 2006 abolished the status of illegitimacy in Scotland.
9.68 The Children Act 1975 changed a lot of provisions concerning succession (and other) rights relating to adopted children. The provisions relating to adoption were re-enacted in the Adoption Act 1976, and the Children Act 1975 was then repealed by virtue of Schedule 4 to the Children Act 1989. The Children Act 1989 made certain amendments to the Adoption Act 1976.
The Children Act 1975 (now repealed but the relevant provisions have been effectively re-enacted ) provided that the adopted child qualified as a child of his adoptive parents' marriage.
An adopted child was therefore brought more fully into the adoptive family so far as property rights are concerned. But, as a corollary, he lost any succession rights as a member of his natural family.
Where a child is adopted and a natural parent of such child has effected an insurance policy with a friendly society or an industrial assurance company for the payment on the child's death of money for funeral expenses, the rights and liabilities under the policy are transferred to the adoptive parents who will be treated as the person who took out the policy.
If a disposition depends on the date of birth of a child then, by Section 42(2) of the Adoption Act 1976, it is to be construed as if: (1) the adopted child had been born on the date of the adoption; and (2) two or more children adopted on the same date had been born on that date in the order of their actual birth. This rule regulates, for example, the relative seniority of children where there is a provision in a will or trust 'to the eldest son of A' and A adopts a child or children.
Where it is necessary to determine for the purposes of a disposition of property effected by a trust, etc whether a woman can have a child, it is presumed (rather curiously) that, following execution of the trust, once a woman has attained the age of 55 she will not adopt a child. If she does, the child will not be treated as her child for the purposes of the instrument.
9.69 Both the Adoption Act 1976 and the Legitimacy Act 1976 contain useful protections for trustees and personal representatives in distributing property. A trustee or personal representative is not under a duty to enquire, before distributing any property, whether any adoption has been effected or revoked, or whether any person is illegitimate if that fact could affect entitlement to the property.
However, trustees and personal representatives have to enquire whether an illegitimate person exists who has or may have an interest in the property before they distribute it.
However, there is protection for trustees and personal representatives in Section 27 of the Trustee Act 1925. Provided they advertise for claims to the property and the conditions of that Section are satisfied, they will be exempt from liability to all claimants except those of whom they had notice. Another means by which personal representatives can safely make a distribution in circumstances where it is not clear if a beneficiary is alive is by obtaining a 'Benjamin Order' which gives personal representatives leave to distribute assets on the basis set out in the order. A Benjamin Order does not require advertising or searches to have been made.
9.70 The Inheritance (Provision for Family and Dependants) Act 1975 implemented the recommendation of the Law Commission in their second report on family property. It gives the courts wide powers to order financial provision out of the estate of the deceased for his family and dependants if the court believes that under the will (or intestacy), the deceased failed to make reasonable financial provision for them.
The persons who may apply to the court are set out in Section 1(1) of the 1975 Act, and are as follows:
(1) the wife or husband of the deceased;
(2) a former wife or former husband who has not remarried;
(3) a child of the deceased;
(4) any person (not a child of the deceased) who was treated by the deceased as a child of the family;
(5) any other person who immediately before the death was being maintained wholly or partly by the deceased;
(6) a cohabitee of the deceased for at least two years immediately before the death of the deceased (provided the deceased died after 1 January 1996). This last provision was added by Section 2 of the Law Reform (Succession) Act 1995.
References to wife, husband and former wife or husband include references to same-sex civil partners and former civil partners.
The 1975 Act lists the types of order in Section 2(1) which the court may make when it decides that reasonable financial provision has not been made for the applicant and in particular specifies methods by which periodical payments may be provided out of the estate, which is explained in Section 2(2). The Act also sets out (in Section 3) the matters which the court must have regard to when deciding whether reasonable financial provision has been made for an applicant.
The property which is available for financial provision is extended by the 1975 Act to include in the estate any property or money comprised in a nomination or donatio mortis causa and, if the court so decides, the deceased's severable share of property jointly owned with others. In Powell v Osborne the court ordered that half the proceeds of a life policy that the deceased held as a joint tenant should be paid to his wife. The deceased had left his wife to live with another woman with whom he had purchased a property on mortgage supported by the policy on their joint lives. The case effectively turned on the value of the policy immediately before the husband's death. The policy had no surrender value immediately before death. However, it was held that as the value of the policy depended on death, its value was for these purposes the same immediately before death as on death.
9.71 The courts also have the power to review certain transactions effected by the deceased within six years before his death other than for full valuable consideration, which were made with the intention of defeating claims for family provision. The courts may require that the property comprised in those transactions be made available for financial provision. Therefore inter vivos gifts or part-gifts may be vulnerable in the hands of any person for the prescribed length of time.
By Section 146 of the Inheritance Tax Act 1984, any inheritance tax paid on property, which is required to be made available for family provision, may be reclaimed from Her Majesty's Revenue and Customs if the revised provisions would result in less (or no) Inheritance Tax being payable. Effectively, the property is added back into the deceased's estate, the order by the court is treated as a disposition by the deceased on his death, and a new calculation of the inheritance tax, if any, is made. For example, the court order may provide for property to be redistributed to the deceased's spouse in which case the new calculation will provide that no inheritance tax will be payable in respect of that property due to the spouse exemption.
'Maintenance' for which an applicant might receive financial provision under Section 1 of the Inheritance (Provision for Family and Dependants) Act 1975 cannot include provision for liability for inheritance tax.
Failure by the deceased to discharge his responsibilities to the applicant, during his minority, did not in itself entitle the applicant to receive financial provision from the deceased's estate under the Act. In Ilott v Mitson and others the Court of Appeal overturned the High Court's decision that a mother could reasonably make no financial provision for her estranged adult daughter, instead leaving her entire estate to charity.
An application to the court cannot normally be made, without the permission of the court, after six months from the date on which representation to the estate is first taken out. Personal representatives are protected from liability for distributing any part of the deceased's estate after this six-month period notwithstanding the fact that the court might make further orders or vary an existing order.
The 1975 Act does not apply in Scotland where provision for dependants is secured by the legal rights and statutory prior rights mentioned in the previous section. It was, however, effectively extended to Northern Ireland by the Inheritance (Provision for Family and Dependants) (Northern Ireland) Order 1979.
9.72 Section 134(1) of the Social Security Contributions and Benefits Act 1992 and associated regulations provide that a person is not entitled to income support if his capital exceeds £16,000. This limit has come in for criticism on the basis that it does not encourage persons to save or to take measures to put in place funds for periods when they are unemployed etc. Also, a claimant is treated as possessing income and capital of which he has deprived himself for the purpose of securing entitlement to income support or increasing the amount of that benefit. This question may arise in relation to the holding of single premium or other life assurance policies where the policyholder requires nursing home care and fees are payable.
The surrender value of a policy is treated as capital, however, the Income Support (General) Regulations 1987 provide that the surrender value can be disregarded in assessing the claimant's eligibility for income support. Interesting questions arise when a claimant invests (deliberately or not) in a single premium life policy which would appear to have the effect of reducing his capital. It is not obviously a disposal of capital as the claimant would still retain ownership of the asset (ie the policy). In a case before the Social Security and Child Support Commissioners the claimant had invested £10,000 into a single premium insurance based investment bond. The Commissioner decided that the surrender value was to be disregarded. However, he also decided that where a significant amount was invested then this operated as a 'deprivation' and an adjudication officer should always consider whether the investment was made for the purpose of securing income support. However, the general position seems to be that such insurance bonds will not be taken into account. See further the Charging for Residential Accommodation Guide (2003) 22, October 2003 (known as 'CRAG') for further details.
9.73 Where a policy on the life of the testator is, by his will, made the subject of a specific legacy, the policy (or the sum assured if the testator was the sole or last surviving life assured) will pass in the first instance to his executors. If, however, the policy is on the life of another person or the policy money is payable by instalments it will have a continuing existence and where the executors do not need it for purposes of administration they may vest it in the legatee.
An assent is some action which activates the gift of the property to the beneficiary concerned (even if further formalities are required to transfer the subject matter to the person entitled) and show that the executors do not require the property for administration. The beneficiary derives his title from the will; the assent merely makes the gift operative. Once the personal representatives have effectively assented, they hold the property on trust to carry out the further requirements. Some form of documentation is often needed in order to vest the legal title to the property in the beneficiary. An assent, by itself, is often of little practical use except in relation to tangible moveable property such as jewellery, furnishings, etc. For a life policy an assignment would be required.
Assents to the vesting of personal estate such as a life policy need not be in writing or in any particular form. This is different to the vesting of a legal estate in land which is required to be in writing. Stamp duty is no longer payable on a written assent relating to non-land transactions (except for some documents relating to stocks, shares and marketable securities).
An appropriation of a policy may be made under Section 41 of the Administration of Estates Act 1925 or under an express power in the will. For a life policy continuing beyond the death of the testator, for example, a policy he had purchased on the life of another person, this would therefore require an assignment (see further Chapter 10)
9.75 Property subject to a charge passes under the will subject to the charge. If, for example, a testator makes a specific bequest of a policy on which there is a policy loan, the legatee will, unless a contrary intention appears from the will, take the policy subject to the loan. He cannot require the executor to pay off the loan out of other property of the testator. It should be noted that the ambit of 'charge' is wide and includes, for example, an equitable charge.
9.76 When a document which represents, or is evidence of, a chose in action (such as a life policy) is delivered by a person in contemplation of death on condition that it shall be the property of the donee only in the event of the death of the donor in the circumstances threatening him, there is a donatio mortis causa of the chose in action. The court will uphold this against the personal representatives. It is a question of fact whether the delivery of a document was made as a gift inter vivos or mortis causa, and to establish the latter there must be evidence that the donor made the gift in contemplation of death.
A life policy can be the subject of a donatio mortis causa. If it is delivered by a person in contemplation of death in circumstances which indicate an intention to give, the court will presume that it was given to be retained only in the event of death and to be returned if the donor should recover. An essential part of the validity of a donatio mortis causa is that the donor should part with dominion over the property so as to prevent it being dealt with by him in the interval between the gift and his death or recovery. It is possible to pass most types of property by donatio mortis causa, such as chattels, but with land the position was not clear until the case of Sen v Headley which decided that the personal representative held the land on trust for the beneficiary of the gift.
9.77 The affairs of mentally disordered persons in England are administered by the Court of Protection mainly in accordance with the Mental Health Acts of 1983 and 2007, the Mental Capacity Act 2005 and various Court of Protection Rules. The Court of Protection may make orders affecting the property of a person who lacks capacity and may appoint a deputy who must act in accordance with the Code of Practice under the Mental Capacity Act, 2005 and the court's directions. The Office of the Public Guardian will supervise the deputy and has an administrative and complaint handling role. A person who lacks capacity cannot deal with his own property whilst the appointment is in force. Before making a payment to the deputy, the life office must be satisfied that the court has made an order authorising the deputy to give a discharge. If the person lacking mental capacity recovers and becomes capable of dealing with his own affairs, the deputy is discharged by a further order of the Court of Protection; the deputy's powers cease automatically on the death of the person lacking capacity.
It should be noted that a person lacking capacity cannot grant a valid power of attorney (see 9.79 below), and any ordinary power he may have given before his incapacity arose will cease to be effective. However, if he gave an enduring or lasting power of attorney before his incapacity, and provided the said power is registered, it will not cease to be effective . It is not possible to effect new Enduring Powers of Attorney but existing Powers signed before 1 October, 2007, may remain in force.
The Court of Protection may execute a will or codicil or effect a settlement for a person lacking capacity. This is known as a 'statutory will'. A patient may make a valid will for himself in a lucid interval even if there is a deputyship order is in force but the person propounding the validity of the will would have to show that it was made during such an interval.
9.78 Where a policyholder domiciled abroad becomes mentally disordered, the person able to deal with his affairs is the officer appointed by the proper court of the country of domicile. Therefore, a a person properly appointed by a foreign court to look after the affairs of a mentally disordered person domiciled and resident abroad may sue for that person's personal estate in England.
Didisheim v London and Westminster Bank
G was entitled to securities deposited with the bank. She was domiciled and resident in Belgium. She became mentally disordered and D was appointed by the Belgian court as her curator. It was held that D could give the bank a good discharge and that on general principles of private international law the English court was bound to recognise the order of the Belgian court.
Pelegrin v Coutts and Co
A domiciled Frenchman resident in Paris deposited securities with Coutts and Co. He became of unsound mind and an administrator was appointed by the Civil Tribunal of the Seine with express power to receive the securities. Coutts and Co refused to act without an order of the English court. Held, that in refusing to act on the order of the French court, Coutts and Co had shown undue and unreasonable excess of caution and must bear their own costs.
9.79 The Mental Capacity Act 2005 received a lot of media attention for its 'living wills' provisions but it also replaced Enduring Powers of Attorney with 'Lasting Powers of Attorney' ('LPAs') on 1 October, 2007. These are wider than EPAs in that there are two types of LPA. One type relates to property and affairs and the other to personal welfare issues.
9.80 Unlike EPAs, LPAs only take effect upon registration with the public guardian. Therefore, donors who wish their attorneys to act on their behalf, even though they retain capacity, will either have to register the LPA or complete a separate ordinary power of attorney. This seems a backward step in that some donors found it helpful to rely on their unregistered EPAs. For example, a donor may be in hospital or nursing home, unable for practical reasons (as opposed to mental incapacity) to attend to their affairs or simply disinclined to get involved with certain issues. EPAs could be used to ease the burden in these circumstances. However, EPAs were open to abuse and the new system requiring registration of LPAs has the advantage of requiring a greater degree of supervision by the Public Guardianship Office. Another safeguard is that a 'prescribed person' must certify that the donor understands the effect of the LPA and that no undue pressure has been placed upon him to sign it. This would appear to be quite an onerous obligation upon the doctor or other prescribed person. Another safeguard is that attorneys and deputies are legally required to have regard to the Mental Capacity Act, 2005, Code of Practice.
9.81 For life offices dealing with attorneys they will obviously need to ensure that the LPA is registered and still in force. The Public Guardian maintains a register of LPAs which can be checked. A life office can also rely on the office copy of the LPA with regard to the content of the LPA which it should check in particular to ensure there are no restrictions or conditions.
 Re European Assurance Society (1876) 3Ch D 391.
  2 All ER 61.
  2 QB 26;  1 All ER 474.
  EWHC 63 Comm.
 Marreco v Richardson  2 KB 584.
 See 'Undertaking: Abbey Life Assurance Company Limited terms and conditions', November, 2008.
 Council Directive 90/619, art 4; now see consolidating directive 'Directive Concerning Life Assurance' 2002/83/EC.
 Brook v Trafalgar Insurance Co Ltd (1946) 79 LlL Rep 365 (CA).
 Made under the provisions of the Married Women's Property Act 1882, s 11.
 See Re Engelbach's Estate, Tibbetts v Engelbach  2 Ch 348.
 O'Reilly v Prudential Assurance Co Ltd  Ch 519.
 Companies Act 1985, s 36A, as inserted by the Companies Act 1989, s 130(2). Now see s 44 of the Companies Act 2006.
 SI 2009/1804.
  1 Lloyd's Rep IR 111.
 ICOBS 8.1.1.
 ICOBS 8.1.2.
 TLR 30/10/98; ILR 4/11/98; (1998) 4 All ER 513; (1998) 3 WLR 1095; (1998) Lloyd's Bank Rep 387; (1999) LGR 1. (See also Deutsche Morgan Grenfell Group plc v Inland Revenue Commissioners  All ER (D) 298 (Oct).)
 Bize v Dickinson (1786) 1 Term Rep 285, ie which if true would have rendered the party under the mistake liable to pay the money in question or which is otherwise fundamental to the transaction.
 (1922) 127 LT 452.
  3 All ER 280.
 (1841) 9 M & W 54.
  QB 677.
 Statoil v Louis Dreyfus Energy Services LP  EWHC 2257 (Comm).
  3 All ER 566.
  1 All ER 1073.
  3 All ER 818.
  EWCA Civ 970.
 Kenny (28034/5). See also Smith (Q00734).
 Limitation Act, 1980, s 32.
 Limitation Act 1980, s 8.
 As amended by the Administration of Justice Act 1965, s 17 and the Courts Act 1971, s 56.
 Braunstein v Accidental Death Insurance Company (1861) 1 B&S 782.
 Prudential Assurance Co v Edmonds (1877) 2 App Cas 487.
 Watson v England (1844) 14 Sim 28.
 Re Phené's Trusts  5 Ch App 139 and Chard v Chard  P 259,  3 All ER 721.
 Re Norris's Goods (1858) 1 Sw & Tr 6.
  QR 51.
  EWHC 3142.
 Re Schulhof, Re Wolf  p 66,  2 All ER 841; Re Dowds' Goods  P 256.
 Section 1(1), (3).
 (1941) Times, 20 June.
 Inheritance Tax Act 1984, s 4(2).
  AC 304.
 1976 SLT 151.
 Harrison v Alliance Assurance Co  1 KB 184.
 Crockett v Ford (1855) 25 LJ Ch 552.
  AC 586.
 Gray v Barr  2 QB 554 CA at 582A, per Salmon LJ.
 Horn v Anglo-Australian and Universal Family Life Assurance Co (1861) 30 LJ Ch 511.
 Beresford v Royal Insurance Co Ltd  AC 586 at 596, per Lord Atkin.
 Ellinger v Mutual Life of New York  KB 31.
 Boyd v Refuge Assurance Co Ltd 1890 17 R 955.
 (1854) 4 E & B 243.
 (1868) LR 7 Eq 394.
  Ch 411.
 Jackson and others v Forster (1859 and 1860) I El & El 463 and 470.
 Prince of Wales Assurance v Palmer (1858) 25 Beav 605; Davitt v Titcumb  3 All ER 417.
  QB 758.
 Re Batten's Will Trusts (1961) 105 Sol Jo 529.
 Chaplin v Royal London Mutual  IAC Rep 2.
  2 QB 554.
  1 FLR 441.
  1 WLR 235.
  3 WLR 1261.
  EWHC 796 (Ch), (2003) 147 Sol Jo LB 537.
 Cleaver v Mutual Reserve Fund Life Association  1 QB 147; referred to in Davitt v Titcumb above.
 See Cleaver v Mutual Reserve Fund Life Association  1 QB 147.
  3 All ER 417.
 Walsh v Legal and General Assurance Society Ltd (1935, unreported).
 Drummond v Drummond (1799) 6 Bro Parl Cas 601.
  1 FCR 1.
 Wankford v Wankford (1704) 1 Salk 299, 309.
 Mills v Anderson  2 All ER 538.
  1 All ER 665, CA. This case provides the potential for relief from the rigid position as set out by Lord Eldon in Ex Parte James (1803) 32 ER 385 and Ex Parte Lacey (1802) 6 Ves 625.
 Supreme Court Act 1981, s 118.
 Barrett v Bem and others  EWHC 1247.
 Re Adams  2 All ER 97 (obliteration of signature with ball point pen).
 Law of Property Act 1925, s 177 (repealed and replaced by the Administration of Justice Act 1982, s 18 which has the same effect for wills made after January 1983).
  Ch 1.
 22nd Report, pp 14–16.
 Section 18(1).
  Ch 446.
 Family Law: The Effect of Divorce on Wills (Law Com No 217).
 Wills Act 1837, s 11; and Wills (Soldiers and Sailors) Act, 1918; Ayling v Summers and others  EWHC 3168 (Ch).
 Administration of Estates Act 1925, s 1(2) and (3).
 Trustee Act 1925, s 18(2).
 Section 36.
 Non-Contentious Probate Rules 1987, SI 1987/2024, r 5(5).
 Rule 5(6).
 Rule 10(1).
 Inheritance Tax Act 1984, s 216.
 Ferneley v Napier and others  EWHC 3345 (Ch).
 Non-Contentious Probate Rules 1987, r 22 and Administration of Estates Act 1925, s 46.
 Luke v South Kensington Hotel Ltd (1879) 11 Ch D 121, 125; Trustee Act, 1925, s 14.
 Inheritance Tax Act 1984, s 199(4) and s 200(4).
 Administration of Estates (Small Payments) Act 1965 and Administration of Estates (Small Payments) (Increase of Limit) Order 1984, SI 1984/539.
 Administration of Estates Act 1925, s 5(i).
 Administration of Estates Act 1925, s 7(3).
  2 KB 209.
 See New York Breweries Co Ltd v A-G  AC 62.
 Inheritance Tax Act 1984, ss 199(4)(a), 200(4).
  Ch 456.
 Now replaced by the Inheritance Tax Act 1984, s 200(4).
  Ch 314.
 Domicile and Matrimonial Proceedings Act 1973, s 4(1).
 IRC v Bullock  1 WLR 1178, CA.
 Buswell v IRC  1 WLR 1631, CA; Re Clore (No 2), Official Solicitor v Clore  STC 609; Plummer v IRC  1 All ER 97,  1 WLR 292.
 Inheritance Tax Act 1984, s 267.
 SI 2009/135.
 SR (NI) 2007/452.
 SI 1977 / 1491 (and subsequent amending orders, eg SI 2008/3162.
 Family Law Reform Act 1987, s 18(2).
 Succession (Scotland) Act 1964, s 36(1).
 Succession (Scotland) Act 1964, s 13.
 Prior Rights of Surviving Spouse (Scotland) Order 2005, SI 2005/252.
 Section 2.
 SR (NI) 2007/452.
 Now Adoption Act 1976, s 39(1)(a)
 Adoption Act, 1976, s 49.
 Adoption Act, 1976, s 42(5).
 Adoption Act, 1976, s 45.
 Legitimacy Act 1976, s 7(1).
 Section 20 of the Family Law Reform Act 1987.
 Re Benjamin  1 Ch 723.
 Family Provision on Death (Law Com no 61) (1971).
 Civil Partnership Act 2004.
  1 FLR 797, CA.
 Inheritance (Provision for Family and Dependants) Act 1975, s 9.
 Inheritance (Provision for Family and Dependants) Act 1975, s 10.
 Re Dennis, Dennis v Lloyd's Bank Ltd  2 All ER 140.
 Harlow v National Westminster Bank plc (1994) 138 Sol Jo LB 31, CA.
  EWCA Civ 346.
 SI 1979/924.
 Income Support (General) Regulations 1987, SI 1987/1967 and the Social Security (Miscellaneous Amendments) (No 2) Regulations 2005, SI 2005/2465.
 Income Support (General) Regulations 1987, SI 1987/1967, regs 42, 51, 51A; For care home fees see the National Assistance (Assessment of Resources) Regulations 1992, reg 25.
 Income Support (General) Regulations 1987, SI 1987/1967.
 Income Support (General) Regulations 1987, SI 1987/1967, Sch 10, para 15 and Sch 4, para 13, National Assistance (Assessment of Resources) Regulations 1992, for the position regarding ability to pay local authority care home fees.
 R(IS) 7/98.
 Finance Act 2003, s 125.
 Administration of Estates Act 1925, s 35. See Ross v Perrin-Hughes  EWHC 2559 (Ch),  All ER (D) 159 (Nov), where a 'contrary intention' was found. This case examined the construction of a gift in a will of a property subject to a mortgage together with surrounding evidence. In this case it was held that the lease should be taken free of the mortgage.
 Amis v Witt (1863) 33 Beav 619.
  Ch 425.
 Enduring Powers of Attorney Act 1985, s 1; Mental Capacity Act, 2007, Section 9.
 Cartwright v Cartwright (1793) 1 Phill 90. (See Banks v Goodfellow (1870) LR 5 QB 549 for the test of testamentary capacity.)
  2 Ch 15.
  1 Ch 696.