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N2-10: Equitable principles

Purchaser of land treated as beneficial owner before completion

 

"[87] In our view, the authorities in this area make it plain that, by virtue of the fact that the purchase price for the Property was paid in full when the Sale Agreement was executed, beneficial ownership of the Property passed at that time from Mrs Elborne to the trustees of the Life Settlement and therefore that Mrs Elborne was not the beneficial owner of the Property when she died. 

[88] We think that the fact that the whole of the purchase price was paid up-front on execution of the Sale Agreement means that this case is readily distinguishable from the uncompleted executory contract pursuant to which none of the consideration had been paid, which was the situation being addressed by the House of Lords in Jerome. 

[89] The decision in Ezair raises a different question in this area, dealing as it does with the rights which the beneficial owner under a sale agreement that has not yet been completed is entitled to create prior to completion.  The basis of Patten LJ’s decision in that case, which relied on the decision of the Supreme Court in Southern Pacific and the Court of Appeal decision in Berkley, is that a contractual purchaser (such as B in Ezair) cannot create rights of a proprietary character which would take priority over other interests in land until the contractual purchaser has acquired the legal estate in the land. When applied to the facts in this case, it means that the trustees of the Life Settlement would have been unable to create proprietary rights over the Property by entering into a contract with a sub-purchaser in relation to the Property prior to acquiring the legal estate in the Property on completion. 

[90] However, that is not the question which we are addressing.  The fact that the trustees of the Life Settlement would have had to acquire the legal estate in the Property before they were able to create proprietary interests in the Property does not mean that the trustees were not the beneficial owners of the Property from the time that the Sale Agreement was executed or, more relevantly, that Mrs Elborne remained the beneficial owner of the Property from that time.  The authorities cited by Mr Bradley and referred to in paragraphs 83 to 86 above are, in our view, compelling that the beneficial ownership of the Property when Mrs Elborne died was vested in the trustees of the Life Settlement and not with Mrs Elborne notwithstanding the fact that completion had not yet occurred." (Executors of Elborne v. HMRC [2023 UKFTT 626 (TC), Judge Beare)

Purchaser of land treated as beneficial owner before completion

Rectification of deed of variation to include statement re tax

"[42] In his witness statement, the first claimant says, in terms, that it was the intention of all parties to the Deed of Variation, and of its draftsman, Mr Evans, that it should be back-dated to the date of death for the purposes of Inheritance Tax. I accept that evidence. It is supported by the attendance note and by the whole objective that the transaction was intended to achieve. The attendance note is permeated by references to the need to achieve a particular result within two years of the date of death in order to achieve Inheritance Tax savings. The mistake was in failing to give effect to the right machinery for achieving that.
[43] I am satisfied that that is a sufficient mistake to found jurisdiction in a court of equity to rectify the relevant Deed of Variation, so far, at least, as the reading-back statement for Inheritance Tax purposes is concerned. I emphasise that this was a mistake which was not extraneous to the terms of the document itself. It was a mistake within the terms of the Deed of Variation. It went to the terms of that document.

[...]

[53] For those reasons, I will make an order in the terms sought by Mr Oughton, but with the omission of any reference to the provisions of section 62, and its relevant subsections, of the Taxation of Chargeable Gains Act 1992. There is to be no order as to costs as between the claimants and the defendants. As stated at the end of the first-named claimant''s witness statement, they are to be picked up by the insurers for the draftsman of the Deed of Variation. Such an approach is entirely consistent with the approach of the Supreme Court in Marley v Rawlings (No. 2), relating to a contested claim, which went all the way to the Supreme Court, for the rectification of a will." (Vaughan-Jones v. Vaughan Jones [2015] EWHC 1086 (Ch), HHJ Hodge)

N2-10: Equitable principles

Purchaser of land treated as beneficial owner before completion

 

"[87] In our view, the authorities in this area make it plain that, by virtue of the fact that the purchase price for the Property was paid in full when the Sale Agreement was executed, beneficial ownership of the Property passed at that time from Mrs Elborne to the trustees of the Life Settlement and therefore that Mrs Elborne was not the beneficial owner of the Property when she died. 

[88] We think that the fact that the whole of the purchase price was paid up-front on execution of the Sale Agreement means that this case is readily distinguishable from the uncompleted executory contract pursuant to which none of the consideration had been paid, which was the situation being addressed by the House of Lords in Jerome. 

[89] The decision in Ezair raises a different question in this area, dealing as it does with the rights which the beneficial owner under a sale agreement that has not yet been completed is entitled to create prior to completion.  The basis of Patten LJ’s decision in that case, which relied on the decision of the Supreme Court in Southern Pacific and the Court of Appeal decision in Berkley, is that a contractual purchaser (such as B in Ezair) cannot create rights of a proprietary character which would take priority over other interests in land until the contractual purchaser has acquired the legal estate in the land. When applied to the facts in this case, it means that the trustees of the Life Settlement would have been unable to create proprietary rights over the Property by entering into a contract with a sub-purchaser in relation to the Property prior to acquiring the legal estate in the Property on completion. 

[90] However, that is not the question which we are addressing.  The fact that the trustees of the Life Settlement would have had to acquire the legal estate in the Property before they were able to create proprietary interests in the Property does not mean that the trustees were not the beneficial owners of the Property from the time that the Sale Agreement was executed or, more relevantly, that Mrs Elborne remained the beneficial owner of the Property from that time.  The authorities cited by Mr Bradley and referred to in paragraphs 83 to 86 above are, in our view, compelling that the beneficial ownership of the Property when Mrs Elborne died was vested in the trustees of the Life Settlement and not with Mrs Elborne notwithstanding the fact that completion had not yet occurred." (Executors of Elborne v. HMRC [2023 UKFTT 626 (TC), Judge Beare)

Purchaser of land treated as beneficial owner before completion

Rectification of deed of variation to include statement re tax

"[42] In his witness statement, the first claimant says, in terms, that it was the intention of all parties to the Deed of Variation, and of its draftsman, Mr Evans, that it should be back-dated to the date of death for the purposes of Inheritance Tax. I accept that evidence. It is supported by the attendance note and by the whole objective that the transaction was intended to achieve. The attendance note is permeated by references to the need to achieve a particular result within two years of the date of death in order to achieve Inheritance Tax savings. The mistake was in failing to give effect to the right machinery for achieving that.
[43] I am satisfied that that is a sufficient mistake to found jurisdiction in a court of equity to rectify the relevant Deed of Variation, so far, at least, as the reading-back statement for Inheritance Tax purposes is concerned. I emphasise that this was a mistake which was not extraneous to the terms of the document itself. It was a mistake within the terms of the Deed of Variation. It went to the terms of that document.

[...]

[53] For those reasons, I will make an order in the terms sought by Mr Oughton, but with the omission of any reference to the provisions of section 62, and its relevant subsections, of the Taxation of Chargeable Gains Act 1992. There is to be no order as to costs as between the claimants and the defendants. As stated at the end of the first-named claimant''s witness statement, they are to be picked up by the insurers for the draftsman of the Deed of Variation. Such an approach is entirely consistent with the approach of the Supreme Court in Marley v Rawlings (No. 2), relating to a contested claim, which went all the way to the Supreme Court, for the rectification of a will." (Vaughan-Jones v. Vaughan Jones [2015] EWHC 1086 (Ch), HHJ Hodge)

Rectification of deed of variation to include statement re tax
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