B. (S.) (Orse S.M.) v. Bank of Ireland [1988] IEHC 23 (27 July 1988)

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E.M.M AND S.H.R.M AND (BY ORDER) M. CHARITABLE TRUST LIMITED AND (BY ORDER) P.M. AND (BY ORDER) A.M.

This is a claim under Section 117 of the Succession Act 1965. The Plaintiff is the youngest child of J R M (to whom I shall refer as the testator) who died on the 20th December 1984 at the age of 70 years. The first four Defendants are the executors and trustees named in the testator's last Will dated the 21st January 1981, which Will was duly proved on the 15th March 1985. The fifth Defendant, M Charitable Trust Limited (to which I shall refer as the Charitable Trust Company) is a charitable trust company incorporated by the testator in 1981 and is one of the beneficiaries in his Will. The sixth and seventh Defendants, P M and A M are sons of the testator.

The testator had no children other than the Plaintiff, P M and A M and all three were adopted. The third named Defendant, E M is the testator's widow.

The testator was a very successful businessman. He was a former Chairman and Managing Director of M Limited, a family company incorporated in 1894, which he had built up to being an extremely prosperous company. The net value of his assets at the date of his death was £1,587,481.

As well as being very successful, the testator was also very charitable. In September 1981 he took the unusual step of incorporating the Charitable Trust Company and between then and the date of his death he transferred to that Company 6,541 £1 ordinary shares in M Limited to be held upon trust for the various charitable bodies and institutions named in two deeds of trust dated respectively the 31st December 1981 and the 1st October 1982. At the date of the testator's death these shares had a value of £367,050.

The testator also created certain trusts in favour of his family. On the 31st July 1968 he executed two discretionary trusts, he, his wife, children and remoter issue and their spouses being the beneficiaries in the first, and the same persons, excepting himself, being the beneficiaries in the second. Under the second of these trusts the Plaintiff and her two brothers received the following benefits:

1. The Plaintiff: Cash payments totalling £41,031 and an individual trust fund of £50,000, the capital value of which is now £115,000, and which provides a monthly income of £550 after payment of tax.

2. P M: Cash payments totalling £17,500 and 5,000 shares in M Limited which at the date of the testator's death were worth £287,500.

3. A M: Cash payments totalling £31,250 (being principally regular payments of income between 1981 and 1985). In addition a capital sum of £300,000 has been set aside for him to purchase a farm.

The Plaintiff, who is now aged 33, was educated at the Hall School in Monkstown and then went to a finishing school in England. In July 1974, when only 19, she married J .

B. The marriage was not a success and the parties separated early in 1980. There were proceedings in this Court in regard to the only child of the marriage, a daughter, R, and by agreement the Plaintiff was given custody of R on condition that she went to reside with her parents at Knockrobin House, Kinsale, and the Plaintiff complied with this condition.

The testator had been opposed to the Plaintiff's marriage but nonetheless gave the Plaintiff a wedding present of a house near Fermoy for which he paid £16,500. In June 1982, by agreement between the Plaintiff and her husband, this house was sold and one half of the net proceeds went to the Plaintiff's husband and the other half is the subject of a trust for R.

After returning to her parents' home, the Plaintiff worked for sometime in a restaurant in Kinsale, and in 1982 opened a vegetable shop there. This venture lasted a little less than a year and then ran into difficulties. It appears that the testator came to the rescue and paid off the debts of the business. The only qualification of a professional nature that the Plaintiff has is a diploma in cooking from Ballimaloe.

At the testator's suggestion the Plaintiff brought proceedings for divorce in England against her husband and a decree of divorce was granted by the Luton County Court, after the testator's death, on the 19th February 1985.

At the time of the testator's death, the Plaintiff was pregnant, but the testator was not aware of this. She gave birth to a son, C. on the 6th March 1985. Since then she has not lived at Knockrobin. She claims that her mother forced her to leave the house; her mother denies this. It is not necessary for me to form any view as to which version is correct as I am principally concerned with the facts as they existed at the date of the testator's death and it is undisputed that at that time the Plaintiff was still living in Knockrobin.

P M who was the eldest of the three children, went into M Limited immediately on leaving school. It appears that he started at the bottom and has now worked his way up to the top. He is married, and has children, one of whom was born before the date of the testator's Will in January 1981.

1. Knockrobin, together with all household furniture and effects, motorcars, farming implements and machinery, livestock etc., was left to the testator's widow for life with remainder (except as to the furniture and effects in the dwelling-house) to P M Knockrobin was valued at £140,000 and the furniture and effects, etc., at £27,076.

3. Five elevenths of the testator's shares in M. Limited (being 5,221 shares worth £300,207-50) were left to the testator's widow for life with the remainder to P

4. Three elevenths of the testator's shares in M Limited (being 3,132 shares worth £180,090) were left to P M absolutely.

5. The remaining three elevenths of the testator's shares in M. Limited were left to the Charitable Trust Company.

7. After other legacies amounting to £44,000 given to various relatives and friends, the residue, which is expected to amount to £542,504 was left as to one sixth each to the Plaintiff, P M and A M, and as to one half to the Charitable Trust Company.

These are the facts on which the Court has to determine the first question which arises for consideration, namely, whether it is of opinion that the testator failed in his moral duty to make proper provision for the Plaintiff in accordance with his means, whether by his Will or otherwise.

In posing this as the first question, I am following what Costello J. said in his Judgment in L. .v. L. 1978 IR 288 at 292:

"Basically, there are two issues which may require to be determined in all proceedings under section 117. First, the Court must determine whether there has been a failure on the part of the testator of the moral duty mentioned in the section and which he owed to the applicants. The second question (which would only arise if the first question were answered affirmatively) concerns the provision which the Court should make out of the testator's estate." The matters to be taken into account by the Court in forming its opinion were enumerated by Kenny J. in the much cited passage from his Judgment in F.M. .v. T.A.M. and Others 106 ILTR 82 at page 87:

"It seems to me that the existence of a moral duty to make proper provision by will for a child must be judged by the facts existing at the date of death and must depend upon

(a) the amount left to the surviving spouse or the value of the legal right if the survivor elects to take this,

(b) the number of the testator's children, their ages and their positions in life at the date of the testator's death,

(d) the age of the child whose case is being considered and his or her financial position and prospects in life,

(e) whether the testator has already in his lifetime made proper provision for the child.

The existence of the duty must be decided by objective considerations. The Court must decide whether the duty exists and the view of the testator that he did not owe any is not decisive."

At the date of the testator's death the Plaintiff was aged 29. She was separated from her husband and was not receiving any alimony from him. She had no home of her own and had no job. She was living with her mother in the family home and while the testator might have envisaged that she could continue to live there during her mother's lifetime, it was uncertain how long this would be and in any event it was normal that a married woman with a child would want to live on her own. Her sole income was what she was receiving from the trust fund of £50,000 which had been set up for her.

Having regard to the testator's very substantial means and having regard to the provision which he made for P M and A M during his lifetime, the former being given shares valued at £287,000 and the latter having had £300,000 set aside for him to buy a farm, and having regard to the Plaintiff's special position, a broken marriage, no job, no home of her own, a daughter to bring up and educate, I am of opinion that the testator failed in his lifetime to make proper provision for the Plaintiff, and equally failed to do so by his Will since out of an estate of over £1,500,000 all that the Plaintiff was given was a share of residue worth £90,000 and a remainder interest in 20% of the contents of Knockrobin. This did not in my opinion amount to proper provision for the Plaintiff in accordance with the testator's means. I am of opinion accordingly that the testator failed in his moral duty to make proper provision for the Plaintiff in accordance with his means and so the Court's obligation is to make such provision for the Plaintiff as is just. And in doing so the Court must follow the directions set out in subsection (2) of Section 117 which is as follows:

"The court shall consider the application from the point of view of a prudent and just parent, taking into account the position of each of the children of the testator and any other circumstances which the court may consider of assistance in arriving at a decision that will be as fair as possible to the child to whom the application relates and to the other children."

What I must do accordingly is to take into account the position of the Plaintiff and of her two brothers, and any other circumstances I may consider to be of assistance in arriving at a decision which will be as fair as possible to her and to them - and my overall approach must be that of a prudent and just parent.

To take the position of the Plaintiff's brothers first, the testator provided amply for them both in his lifetime and by his Will. What each received in the testator's lifetime greatly exceeded what the Plaintiff received, and under the testator's Will this inequality was continued especially in so far as P is concerned. All that the Plaintiff was left was an equal share with them in half the residue and a half of the interest each of them will take in the furniture and effects in Knockrobin after the death of the testator's widow. Neither P's position nor A's required that special provision should be made for them. P had a secure position in M Limited, had married and had a family. A was also married and had a family and had had £300,000 set aside for him to enable him to purchase a farm. The Plaintiff, on the other hand, had had a broken marriage and was separated from her husband. She was back living in her parents' home with her daughter. She had no job and very little qualifications for getting one. She was 29 years of age at the date of the testator's death and judged as of that time, which is the date on which the Court must assess the position, it is clear that her prospects in life were not bright.

So, looking at the matter objectively, and as a just and prudent parent, what guide is available as to the measure of the provision that should be made for her? It seems to me that it is to be found in the requirement that the Court's decision should be as fair as possible to the Plaintiff and to her two brothers. If the decision is to be fair to the Plaintiff, I consider that the only way it could be is if it puts her in a position somewhat similar to that of her brothers. Otherwise, could the Plaintiff not justifiably claim that the decision was not just because there was an unfairness in her being treated much less favourably than her brothers? and at the same time such a decision could not be considered to constitute any unfairness to her brothers provided that their entitlements under the Will are not interfered with a matter I shall deal with shortly when considering from what source the provision for the Plaintiff should come. Taking into account all the relevant circumstances, the provision which I think just for the Plaintiff is a sum of £250,000.

From what source should this provision come? It seems clear that there are only two possible sources - on the one hand, the devises and bequests to the Plaintiff's brothers, and on the other, the bequests to the Charitable Trust Company. Subsection (3) of Section 117 prevents the devises and bequests to the testator's widow being touched (the testator's widow elected in writing to take the devises and bequests to her in the Will) and to take moneys from the pecuniary legatees would be to contravene the principle of interfering as little as possible with the testator's Will. So the choice is between reducing the entitlement of the Plaintiff's brothers or that of the Charitable Trust Company, or both.

It is necessary first to consider what their respective entitlements are. In the case of the Plaintiff's brothers, it is each of their one sixth shares of the residue which together amount to approximately £180,000 and the 3,132 £1 ordinary shares in M Limited left to P M. In the case P of the Charitable Trust Company, it is the 3,132 £1 ordinary shares, the legacy of £80,000, and one half of the residue.

However, these respective entitlements were altered by a compromise reached in the course of the administration of the testator's estate and it is necessary now to refer to this.

As stated earlier, the testator incorporated the Charitable Trust Company in September 1981, some months after he had made his Will, and between then and the date of his P1 death he transferred 6,540 £1 ordinary shares in M Limited to the Charitable Trust Company. The executors were advised that the bequest in the Will to the Charitable Trust Company of three elevenths of the testator's shares, i.e., 3,132 shares, might have been adeemed by the transfer of the 6,540 shares during his lifetime and accordingly they took out a summons to have it decided by this Court if the bequest had been adeemed or not. These proceedings were compromised by an agreement entered into between the Charitable Trust Company and the Attorney General on the one hand and the testator's widow, P M. A M and the Plaintiff on the other, the terms of which agreement were approved by the Commissioners of Charitable Donations and Bequests in Ireland on the 14th June 1988. Under the agreement the Charitable Trust Company agreed to forego its claim to the bequest of three elevenths of the testator's shares in consideration of the payment of the sum of £50,000 by the testator's widow and H P M. It was further agreed that the testator's shares, in lieu of the manner in which they were bequeathed in the Will, should devolve as to five eights to the testator's widow for life with remainder to P M and A. M in equal shares and as to three eights, being 4,307 shares, to P M absolutely.

So the number of shares which P M took immediately under the Will was increased from 3,132 to 4,307. Furthermore, the value of the £1 ordinary shares in M Limited has now risen to £80 per share so that the 4,307 shares to which P M is now entitled have a value of £344,560. It is these shares and the Plaintiff's brother's shares of residue valued at approximately £180,000 which are the possible source for making provision for the Plaintiff in so far as her brothers are concerned.

The Charitable Trust Company's entitlement, following the compromise, is as follows:

3. The bequest of one half of the residue which is expected to amount to £270,000.

The Charitable Trust Company's total entitlement amounts therefore to £400,000.

It was submitted on behalf of the Plaintiff and on behalf of her mother and brothers that the bequests to the Charitable Trust Company should be the sole source out of which provision should be made for the Plaintiff; that any decision which reduced the amounts left to P M and A would not be as fair as possible to them as subsection (2) of Section 117 required. It was further submitted that the subsection made fairness to members of the family obligatory whereas there was no such requirement in regard to third parties.

On behalf of the Charitable Trust Company it was submitted that the Court was required to take into account any other circumstance which the Court might consider of assistance and one of the circumstances that the Court should look at was that the testator clearly felt he had a moral obligation to give to charity and his convictions in this regard should be respected. I have no doubt that some weight must be given to this factor but it seems to me that a more important circumstance is that the value of the shares which the testator had given to the Charitable Trust Company in his lifetime has increased significantly since his death. The value of the £1 share was then £57.50 and is now £80 so the Charitable Trust Company is continuing to benefit from the testator's bounty. The increase in the capital value of the 6,540 shares since the testator's death is £147,150.

Taking all the relevant circumstances into account it seems to me that my decision in favour of the Plaintiff would not be as fair as possible to P M and A M if it would result in their entitlements under the Will being reduced when there is another source that can be resorted to, and accordingly I consider that the provision for P the Plaintiff should be made out of the £400,000 to which the Charitable Trust Company is entitled.

It was suggested in the course of the argument that if I granted the application the manner in which the funds should be made available to the Plaintiff should be by means of a trust. I have given careful consideration to this suggestion but do not propose to adopt it. When the Plaintiff's trust fund of £50,000 was set up in 1980, the Plaintiff's situation was very different from what it is now. She was recently separated from her husband but had not yet divorced. The main purpose of the trust would appear to have been to protect the funds from her husband. Apart from this, the testator saw no reason to make the Plaintiff's share of residue the subject of a trust. The £250,000 will accordingly be paid to the Plaintiff directly.

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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> B. (S.) (Orse S.M.) v. Bank of Ireland [1988] IEHC 23 (27 July 1988) URL: http://www.bailii.org/ie/cases/IEHC/1988/1988_IEHC_23.html Cite as: [1988] IEHC 23

High Court of Ireland Decisions