Blog
Practical tips for trustees dealing with breach of trust allegations
Laura Phillips TEP
Margulies v Margulies [2022] EWHC 2843 (Ch) is no less than the sixth set of proceedings between two brothers following the death of their father in 1991. This case is the latest in that series of proceedings and provides helpful pointers on the importance of certainty when drawing up inheritance plans. It also includes a useful summary of the law on cause of action estoppel and abuse of process.
The background
Mr A Margulies made a will, dated 1982, in which he appointed his eldest son M and solicitor as executors, and left everything to M absolutely. His two other children, S and J, were not included in the will. He died in 1991.
S brought proceedings in 1997 against M on the basis that their father had created a ‘secret trust’ in favour of S, which he claimed was evidenced by a series of letters written by their father asking for M to make provision for S, and that M accepted this charge either impliedly or expressly.
The judge at first instance rejected this. For a trust to be valid and enforceable, the ‘three Cs’ must be satisfied:
- There must be certainty that the settlor (the person making the trust) intends to create a trust, i.e. to create a formal obligation that is legally enforceable, rather than a gift.
- Who the beneficiaries are must be certain, i.e. they must be identifiable.
- What is held in the trust must be certain. For example, it must be over identifiable assets.
Carnwarth J found that the language used in the letters written by Mr Margulies was too vague to satisfy the certainty needed to create a formal trust. At best, it imposed only a “moral obligation” on M to look after his siblings financially, although some letters referred to their father’s wish that he retain ‘absolute discretion’. Additionally, Carnwarth J found no evidence of the need for secrecy around the alleged trust. The claim was struck out.
In 2000, S appealed, citing evidence of alleged tax evasion as the reason for secrecy. The Court of Appeal decided that this argument also failed and the case was struck out.
The current case
The present case was brought again by S, who contended that there was indeed a secret trust over a Swiss bank account, but that “the particular arrangement or mechanism (…) was not known to [the Claimant] at this stage.”
M argued that the claim was not materially distinguishable from the claim previously brought in 1997, and so was barred by ‘cause of action estoppel’. In the alternative, M claimed that the claim was abusive, and applied for summary judgment.
Cause of action estoppel
Cause of action estoppel is a legal principle that applies to stop claims being brought in later proceedings, where an identical claim has already been disposed of in earlier proceedings.
In this most recent case the Chancellor of the High Court decided that the new claim brought by S was not materially distinguishable from the 1997 proceedings. In both proceedings the question was whether Mr Margulies had created a trust in his lifetime. It was decided by the Court of Appeal in 2000 that he had not. The new claim brought by S was materially the same, and so was barred from being re-litigated. In addition, the Chancellor considered that issue estoppel also applied.
Abuse of process
The Chancellor agreed with M’s alternative case that the claim was abusive, based on the principle in Henderson v Henderson (1843) 67 ER 313, which established the rule that a party to litigation should bring their whole case to a set of proceedings. It prevents a party from advancing a claim in later proceedings that should have been dealt with, in finality, in the earlier proceedings.
Conclusion
In any event, the Chancellor also decided that the claim had no real prospect of success, and so if it had not have been barred by the above legal principles, summary judgment would have been granted against S.
The case is therefore a reminder of the importance of taking care when setting out your wishes after death. Ensuring that wishes are set out clearly in writing, and ideally in conjunction with independent legal advice to help you understand the effect of those wishes on your intended beneficiaries, can reduce the risks of disputes arising after death.
Further Information
If you have any concerns about a potential dispute in relation to a Will or trust, please see our Will and Inheritance Disputes webpages. For further information on the issues raised in this blog, please contact Phoebe Alexander or any member of the Dispute Resolution team.
About the Author
Phoebe Alexander joined Kingsley Napley in 2020. She is currently an Associate in the Dispute Resolution team. Phoebe completed her training contract at Kingsley Napley and qualified as a solicitor in September 2022. During her seat with the Dispute Resolution team, Phoebe assisted with a broad range of cases. These included probate and inheritance disputes; media, privacy and reputation management; as well as civil fraud and general commercial matters, including freezing injunctions and asset disclosure orders.
Share insightLinkedIn X Facebook Email to a friend Print