As I explain in paragraph 1.3 of my book, the
‘Contentious Probate Handbook’ (published by the Law Society in 2016), ‘From the outset, and throughout the conduct of the case, it is incumbent upon a practitioner to evaluate the client’s costs/risk calculus and the benefits of proposing/engaging in ADR. To obtain a quick indication you can roughly estimate the cost of your client getting what he or she wants (i.e. if he or she wins), and factor in the litigation risks. Even if your client wins, and nothing is absolutely certain in litigation, where an executor is entitled to an indemnity out of the estate for costs properly incurred, the capital value of the estate will have been diminished by legal costs and experts’ fees incurred in the litigation. Lose, and your client ends up in negative equity. Then compare the costs of ADR with the costs of a trial.’
While solicitors are the gateway to mediation, in practice there are 3 obstacles:
(i)          a participant [‘P], i.e. a lay client, may not understand that Mediation can save them money where it is an opportunity to transform the dispute into a joint problem solving exercise by applying estate & business succession planning principles to discover & unlock tax efficiency post-death, resulting in the consequential enlargement of the estate/trust fund pie for settlement &
distribution/administration;
(ii)        a mediation advocate [‘MA‘] may not understand that the most important person in the room is their client, i.e. because it is P‘s case; and that their job is to help P resolve the dispute in a cost-efficient manner, i.e. sooner rather than later; and
(iii)       the MA, may not be qualified as a TEP, or have sufficient knowledge of tax law & estate planning principles.
A mediation structuring technique which can help move the P‘s and their MA’s along the path to settlement in a face to face or online mediation, is for the mediator to make two pre-mediation zoom calls instead of one:
1st – with each P‘s MA (without their client present), to understand what brought the P‘s to the table and vice versa, what kept them away until now, e.g. lack of understanding about mediation/ psychological aversion & refusal by P to mediate; and

2nd – with each P in the presence of their MA (which would usually take place anyway to test the link in an online mediation), to enable:
(a)  each P and their MA to prepare to do a deal; and
(b)  afterwards for a conversation to take place between each P & their MA about how best to prepare to do a deal.
Please feel free to contact me if you would like to have a no-obligation telephone discussion about mediation. I have been invited
by the Law Society to draft a 2nd edition of the book, and in December will be drafting the chapter structure for submission to the Law Society for approval. This will include an expanded section on ‘efficient mediation’ & ‘effective mediation advocacy.’

There appears to be some confusion amongst contentious probate practitioners about the duties owed by an executor in relation to land. An executor is not under a duty (i.e. any legal compulsion) to sell land, because s.2 of the Trusts Of Land And Appointment of Trustees Act 1996 clearly and unequivocally states:
‘Abolition of doctrine of conversion.  
(1)           Where land is held by trustees subject to a trust for sale, the land is not to be regarded as personal property; and where personal property is subject to a trust for sale in order that the trustees may acquire land, the personal property is not to be regarded as land.
(2)           Subsection (1) does not apply to a trust created by a will if the testator died before the commencement of this Act.
(3)           Subject to that, subsection (1) applies to a trust whether it is created, or arises, before or after that commencement.’ Executors are statutory trustees of land, s.1(i)(a) Trusts Of Land And Appointment of Trustees Act 1996. Where Box 10 of an HM Land Registry form TR.1 declares that executors ‘hold the property on trust’, they hold the property on an ‘express trust of land’, i.e. as trustees. The duties of executors, trustees, and trustees of land are the same in relation to land, see Byrnes v Kendle [2011] HCA 26, (2011) 243 CLR 253, at paragraphs 67 and 119, which was cited in Brudenell-Bruce v. Moore [2014] EWHC 3679 (Ch), by Mr Justice Newey at 88. Trustees must manage trust property for the benefit of the beneficiaries, i.e. ‘they should let or relet trust realty … where that is the appropriate mode of making the property beneficial to the trust’ [Lewin on Trusts, Twentieth Edition (2020), paragraph 34-055], because ‘they are also under a duty to seek a renewal of the lease if a renewal would be beneficial to the trust’ [Lewin, paragraph 34-055], i.e. where property is retained when it is imprudent to sell it. That is because, ‘The overriding obligation of trustees is ordinarily to preserve and safeguard the trust property’ [Lewin, paragraph 34-001]. Trustees may therefore be obliged to generate income from land comprised in the trust, Brudenell-Bruce v. Moore [2014], at 88. ‘Trustees are bound to sell at the best price reasonably obtainable…’ [Snell’s’ Equity, 34th edition (2020), paragraph 28-009]. Trustees must act prudently, because ‘… if they contract under circumstances of haste and improvidence, they may be personally liable for the loss’ [Lewin, paragraph 37-034]. ‘Trustees must be careful not to sell under unnecessarily depreciatory conditions’, [Snell, paragraph 28-10]. In relation to the exercise of their powers of investment, executors are trustees for the purposes of the Trustee Act 2000 (see s.28).

There are three scenarios in which the FTT can make a costs order:

• Wasted costs.
• Unreasonable conduct.
• Complex cases, i.e. where a case has been allocated to the Complex case category under r.23.

In GC Field & Son Ltd & ors v. HMRC [2022] UKFTT 00314 (TC), which was an application for costs in the FTT, Judge Amanda Brown QC stated the following principles in relation to the test to be applied in a claim for unreasonable costs:

• Rule 10(1) FTT Rules provides: ‘(1) The Tribunal may only make an order in respect of costs (or, in Scotland, expenses): (a) under section 29(4) of the 2007 Act (wasted costs) …

(b) if the Tribunal considers that a party or their representative has acted unreasonably in bringing, defending or conducting the proceedings.’

• The FTT Rules do not provide for the payment of costs in standard category appeals.
• ‘[T]he general rule … is that there should be no order for costs”. MG v Cambridgeshire County Council [2017] UKUT 00172 (ACC) at paragraph [26].
• Where the Tribunal identifies that there had been unreasonable conduct in the proceedings there is a discretion and not an obligation for the Tribunal to award costs (see Tarafdar v HMRC [2014] UKUT 0362 (TCC).
• The question of the threshold for unreasonableness was considered in the context of the tax tribunal by the Upper Tribunal in Market & Opinion Research International Ltd v HMRC [2015] UKUT 12 (TCC) (MORI).
• The UT endorsed the summary by the FTT of what might constitute unreasonable conduct.
• Acting unreasonably may take the form of a single piece of conduct and may include an omission.
• The test does not preclude the possibility that there were a range of reasonable ways of acting rather than only one.
• Wrong assertions are not automatically unreasonable.
• Rule 10(1)(b) FTT Rules is not to be used as a backdoor to cost shifting not otherwise permitted under the FTT Rules.
• The leading authority on the circumstances in which costs are payable pursuant to rule 10(1)(b) FTT rules in the Tax Chamber is to be found in the Court of Appeal judgment in Distinctive Care v HMRC [2019] EWCA Civ 1010.

The Court endorsed the approach adopted in MORI.

It also endorsed, at least in the limited circumstances in which it was relevant, the analysis of the president of the Upper Tribunal Asylum and Immigration Chamber, sitting as a FTT judge in Cancino v Secretary of State for the Home Dept; Cancino (Costs – First-tier Tribunal – new powers) [2015] UKFTT 59 (IAC) (Cancino).

On the basis of this endorsement, and the standing of the panel considering the costs application in Cancino, this Tribunal considers the views adopted in that case are highly relevant and persuasive on the approach to be adopted. They also largely apply the binding authority of Ridehalgh v Horsefield [1994] Ch 205 (Ridehalgh) to the Tribunal.

In Cancino the Tribunal reinforced the discretionary nature of a wasted or unreasonable costs order identified in paragraph [33] above.

The Tribunal considered in some detail provisions similar to rule 10 FTT Rules which, as set out above, provides for a discretion to make an award of costs where costs have been wasted and/or where conduct is unreasonable. By reference to the Court of Appeal judgment in Ridehalgh the Tribunal (at paragraph [16]) identified the mischief intended to be addressed by the wasted costs rules as:

“the causing of loss and expense to litigants by the unjustifiable conduct of litigation by their or the other side’s lawyers. Where such conduct is shown, Parliament clearly intended to arm the Courts with an effective remedy for the protection of those injured.”

• Wasted costs were identified in Ridehalgh (at page 232d-h, quoted in Cancino paragraph [16]) as payable where there was improper, unreasonable or negligent conduct which were defines as follows:

“Improper means what it has been understood to mean in this context for at least half a century. The adjective covers, but is not confined to, conduct which would ordinarily be held to justify disbarment, striking off, suspension from practice or other serious professional penalty. It covers any significant breach of a substantial duty imposed by a relevant code of professional conduct. But it is not in our judgement limited to that. Conduct which would be regarded as improper according to the consensus of professional (including judicial) opinion can be fairly stigmatised as such whether or not it violates the letter of a professional code. …

Unreasonable also means what it has been understood to mean in this context for at least half a century. The expression aptly describes conduct which is vexatious, designed to harass the other side rather than advance the resolution of the case and it makes no difference that the conduct is the product of excessive zeal and not improper motive. But conduct cannot be described as unreasonable simply because it leads in the event to an unsuccessful result or because other more cautious legal representatives would have acted differently. The acid test is whether the conduct permits of a reasonable explanation. If so, the course adopted may be regarded as optimistic and as reflecting on a practitioner’s judgment, but it is not unreasonable. …

We are clear that negligent should be understood in an untechnical way to denote failure to act with the competence reasonably to be expected of ordinary members of the profession. …We would however wish firmly to discountenance any suggestion that an applicant for a wasted costs order under this head need prove anything less than he would have to prove in an action for negligence.”

• As noted in Cancino, the Court in Ridehalgh went on to apply the decision of the House of Lords in Saif Ali v Sidney Mitchell [1980] AC 198, in this context “negligent” conduct arises where a solicitor (or representative) in respect of “advice, acts or omissions in the course of their professional work which no member of the profession who was reasonably well informed and competent would have given or done or omitted to do.”
• Ridehalgh also recognised that a “Court’s satisfaction that a legal representative has acted improperly, unreasonably or negligently and that such conduct has caused the other side to incur an identified sum of wasted costs, is not bound to make an order, but in that situation it would of course have to give sustainable reasons for exercising its discretion against making an order.” (Ridehalgh page 239e quoted paragraph 18 of Cancino).

• The Tribunal also endorsed the application of a three-stage test when exercising the discretion to award wasted costs as set out in Ridehalgh:

(1) Has the legal representative of whom complaint is made acted improperly, unreasonably or negligently?

(2) If so, did such conduct cause the applicant to incur unnecessary costs?

(3) If so, is it, in all the circumstances of the case, just to order the legal representative to compensate the applicant for the whole or any part of the relevant costs?

• In the context of a wasted costs order it was also noted (again applying Ridehalgh at page 234):

“A legal representative is not to be held to have acted improperly, unreasonably or negligently simply because he acts for a party who pursues a claim or a defence which is plainly doomed to fail”.

• In the context of wasted costs (which are awarded against the legal representative of a party rather than the party who they represent) the rationale for this conclusion is that legal representatives may advise their clients of the weakness of a position but may nevertheless be instructed to run the case.
• Having undertaken a thorough exposé of the history, rationale and theoretical application of the equivalent to rule 10(1)(a) FTT Rules, the Tribunal went on to consider the equivalent provision to 10(1)(b). At paragraph [23] it states (as it would apply to rule 10 FTT Rules):

“… [10(1)(b)] is concerned only with one species of unacceptable conduct, namely that which is unreasonable. We consider that the question of whether conduct is unreasonable under this limb of rule [10] is to be determined precisely in accordance with the principles which relate to unreasonable conduct under rule [10(1)(a)]. We find nothing in the 2007 Act or the rule itself to suggest otherwise. Thus the basic test will be whether there is a reasonable explanation for the conduct under scrutiny. …”

• On the question of the threshold, again by reference to Ridehalgh, the Tribunal stated that the cost shifting rule was to be used in only the clearest of cases and should not be invoked without good reason (see paragraph [27]).
• Finally, when considering the reasonableness of a party’s conduct, the Tribunal considered that the conduct of a litigant in person cannot be evaluated by reference to the standard of qualified lawyers, but neither may that be permitted to operate as a carte blanche to misuse the process of the Tribunal.
• In that context the Tribunal also has in mind the considerations of the Supreme Court in BPP Holdings International Ltd and others v HMRC [2017] UKSC 55. In the context of a debarring decision issued against HMRC, Counsel for HMRC invited the Supreme Court to take account of the fact that the debarring order prevented HMRC from discharging its public duty and could lead to the public interest being harmed. Lord Neuberger (with whom the other justices agreed) considered that to so hold would set a dangerous precedent and would discourage public bodies from living up to the standards expected of individuals and private bodies. He considered that there was “at least as strong an argument for saying that the courts should expect higher standards from public bodies than from private bodies or individuals”. However, he went on to determine that all courts and tribunals should hold all parties to the same standard.
• BPP is the later of these authorities and the Tribunal considers, in the context of a jurisdiction in which parties more commonly represent themselves and/or are not legally represented (including where HMRC conduct litigation through non-legally qualified litigators), the standard to be applied for a wasted costs order, personal to the representative, is that of reasonable competence by reference to their skills and experience.
• By reference to the analysis provided in Ridehalgh and considered as applicable to the Tribunal costs regime in Cancino, the Tribunal distils the test to be applied in determining whether an unreasonable costs order should be made as follows:

(1) Where a case is allocated to the standard category the cost shifting regime provided under rule 10(1)(a) and (b) should be applied only where the conduct of the party (in the case of an unreasonable costs order) and the representative (in the case of a wasted costs order) should, on the facts, be reserved for the clearest of cases and only where there is good reason to make an award of costs justifying cost shifting.

(2) The circumstances in which an award of costs is to be made under rule 10(1)(b) is unreasonable conduct. Whilst it should readily be concluded that improper conduct (within the description provided in Ridehalgh) would naturally fall within unreasonable conduct (as improper conduct is likely to also to be considered vexatious) the same is not true for negligent conduct (in an “untechnical” way). The inclusion of negligence within a waste costs order can be reconciled with the fact that a wasted costs order imposes a costs penalty on a representative and not on the party appointing the representative.

(3) The acid test for unreasonable conduct is whether the conduct permits of a reasonable explanation.

(4) There is a three-stage approach to exercising the Tribunal’s discretion when awarding unreasonable costs as identified in paragraph [43] above. It is the overriding objective of acting justly and fairly in all the circumstances which underpins that three-stage approach.

See: GC FIELD & SON LTD & Ors v Revenue & Customs (COSTS – application for unreasonable costs – whether failure by HMRC to adduce evidence) [2022] UKFTT 314 (TC) (01 September 2022) (bailii.org)

This week I started the module about ‘Museums’ on the Institute of Art & Law ‘Diploma in Art Law’ course. Where a museum is found to have disposed of an object from its collection by sale, exchange, donation or transfer by any means to any person (‘Deaccession’) in consequence of financial and economic pressures and inadequate capital and revenue funding, it may be censured by Arts Council England and stripped of its accreditation. That in turn, renders the institution ineligible for various sources of public grant and a low priority for other public schemes. Whether a non-statutory museum which is a charity has the power to deaccession is governed first by its constitution, which may or may not provide an express power. In the absence of a power, the necessary power may be obtained. However, any such power:
(i) can only be exercised in furtherance of the objects of the charity; and
(ii) in exercising the power, the trustees must perform their duties (including fiduciary duties requiring them to obtain the best ‘price’).
In addition to the module, I am also writing an essay for the course entitled, ‘Deaccessioning Powers of Museum Trustees, Duties, Powers, Variation, Applications, and Procedure.’ See the ‘Mediation of Art & Cultural Heritage Disputes’ page at www.carlislam.co.uk. This will provide a current restatement of the Law on Museum Deaccessioning.

‘What is a “Lehman moment”? Generally speaking it’s the point at which one company’s disaster becomes everyone else’s problem, as happened in September 2008 when the losses Lehman Brothers had made by betting on America’s subprime mortgage market became insupportable, the investment bank filed for the biggest bankruptcy in corporate history, and panic spread like a disease through the global financial system.’

See: The energy industry is moving into a credit crunch | LinkedIn

In order to argue an interpretation of Tax Law, the advocate must:
1st analyse the burden of proof, i.e. what the taxpayer [‘TP’]  has to prove as a matter of law regarding the relevant tax treatment by reference to:
·       the statutory framework and provisions applicable to the dispute; and
·       case law.
2nd determine the specific questions of fact,  i.e.
·       what the TP has done to fall within the ambit of the specific tax treatment asserted; or
·       whether there is a different tax treatment, because as a matter of fact, the TP did something else.
This requires detailed investigation and the drafting of a chronology of events.
3rd consider the following ‘cannons of construction’:
·       It is ‘preferable to begin with the interpretation of the legislation, and the fundamental question whether it can be given a purposive interpretation going beyond its literal terms: that is to say, whether a Ramsay approach is possible at all, and if so, the purposive construction on which it is to be based. … The question next arises how, on its proper interpretation, the legislation is to be applied to the facts.’ (UBS AG v. Revenue and Customs Comrs [2016]).
·       Where a statute contains no explanation of the purpose of the provision on which a purposive interpretation might be based, the judge may consider the historical background to and development of the legislation by reference to budget notes, explanatory notes and case law.
·       ‘… The driving principle in the Ramsay line of cases continues to involve a general rule of statutory construction and an unblinkered approach to the analysis of the facts. The ultimate question is whether the relevant statutory provisions, construed purposively, were intended to apply to the transaction, viewed realistically.’ (Collector of Stamp Revenue v. Arrowhead Assets Ltd [2003]).
·       When interpreting a statute, a court may adopt a strained interpretation instead of one that would be contrary to the clear intention of Parliament (Luke v. Inland Revenue Commissioners [2019]). The intention of Parliament must be clearly found on the wording of the legislation (Hancock v Revenue and Customs Comrs [2019]. An inconsistency is not sufficient. There must be a clear contradiction.
·       The headings in the statute are aids to construction (Stephens v Cuckfield Rural District Council [1960]).
·       The Explanatory Notes to an Act of Parliament may also be relevant to interpreting specific statutory provisions (R (otao Westminster City Council) v. National Asylum Support Service [2002] & Christianuyi v. Revenue and Customs Comrs [2018]).
·       For reference to be made to Hansard, there needs to be an ambiguity, obscurity or absurdity in the statutory interpretation that justifies such resort (Pepper v. Hart [1992]).

As I explain in paragraph 7.9 of my book the ‘Contentious Trusts Handbook’ published by the Law Society in July 2020, ‘An illusory trust is not a valid trust. It is a pretense. Whereas a sham is concerned with the parties subjective intentions, whether a trust is illusory turns entirely upon construction of the terms of the trust. Where in substance, what is created is not a discretionary trust, but rather a form of trust analogous either to a:

•  bare trust: or
•  fixed interest trust,

under which the settlor is to be regarded as the 100% beneficial owner of the trust fund, then the court may conclude that the trust is illusory. A trust will also be illusory if the trustees owe no enforceable duties to the beneficiaries so as to eliminate the irreducible core of obligations fundamental to the trust concept. The only trust created will be a bare or resulting trust in favour of the settlor.

As part of my summer Tax litigation update reading, which involved reading: the 10^th edition of ‘Tiley’s Revenue Law’, the 5^th edition of Keith Gordon’s book, ‘Tax Appeals – Law and Practice at the FTT’; and the 2^nd edition of Tolley’s ‘A Practical Guide to Tax Disputes’ by Adam Craggs, Julian Hickey & Jonathan Levy , I am now on page 552 of ‘Tolley’s Estate Planning 2021-2022’ by gurus Sharon & Simon McKie, which contains the following commentary about illusory trusts:

‘Another, and in some ways novel, approach to challenging a disposition into trust which fell short of a finding of sham was successfully pursued in the case of JSC Mezhdunarodniy Promshlenniy Bank v. Pugachev [2017] … The settlor, who was also the protector and a discretionary beneficiary, had reserved a substantial number of powers. It was a combination of these factors (and the particular facts of the case) which led the court to conclude inter-alia there was no real intention to create a trust and that the settlor had never intended to part with control of the assets, i.e. that the trusts were illusory. In Webb v Webb [2020], the Privy Council, on appeal from the Court of Appeal of the Cook Islands, found in Pugachev-esque fashion that, “the Court of Appeal is plainly entitled to find as it did the trustees failed to record an effective alienation by Mr Webb of any of the trust property. The bundle of rights which he retained is indistinguishable from ownership.”’ See also my earlier blog, ‘The offshore trust that never was!’

See: The hidden danger of dock strikes | LinkedIn

Since more than one court may have jurisdiction under conflict of laws principles, legislative provisions which merely proclaim that an offshore financial court has jurisdiction, do not automatically preclude the jurisdiction of an onshore court [‘OC’]. The OC will determine whether it has jurisdiction. Where the issue of jurisdiction turns on the ‘proper law’ of the trust, and the OC determines that the offshore trust is governed by onshore law, the trust will be deprived of investor friendly rules under the offshore trust law regime. Thus, the existence of an ‘exclusive jurisdiction’ clause in an offshore trust instrument is not determinative of jurisdiction. While the rule against the ‘enforcement of foreign revenue laws’ is that a state will not enforce or assist in the enforcement of the revenue laws of another state, the status of the rule is convoluted. Recently, the rule has also been circumscribed. Some offshore jurisdictions have voluntarily bypassed the rule, expressing a willingness to assist onshore tax authorities, particularly where criminal activities have been alleged. The rule should also be considered within the context of treaty arrangements, either in relation to double taxation treaties, or in the facilitation of exchange of information agreements. Therefore, a jurisdictional challenge based on ‘conflict of laws’ can nullify offshore legislative initiatives.

‘An emerging basis for assuming jurisdiction over offshore trusts, particularly by US courts, is the in rem jurisdiction of the courts in relation to fraud and injustice, utilizing an “alter-ego” or “sham” argument. In International Credit Investment Company (Overseas) Ltd  v. Adham [1997] 141 SJLB 56, the court found that it could assume jurisdiction over shadowy offshore trusts and companies and “pierce the corporate veil” of such entities because they were still “indirectly controlled” by onshore residents. The court recognized that an earlier generation of judges “would not have exercised such jurisdiction but felt that such drastic action was now a matter of necessity because of international fraud.”’ (Trusts And Related Tax Issues In Offshore Financial Law, by Rose-Marie Antoine).

What is next for Rory Stewart – ‘Still in his 40s, Stewart has already lived many lives: as an award-winning writer, a cabinet minister, a podcaster, an academic, a soldier and a diplomat. Now comes another ambitious challenge. “I think we have a chance of ending extreme poverty worldwide,” he says, absolutely impassioned. “I can lead a movement starting in Africa that can demonstrate in a couple of countries how it could be done.”
And after Stewart ends world poverty? “I’d like to take a camel from Morocco to Timbuktu,” he says.’

https://www.theguardian.com/lifeandstyle/2022/aug/29/rory-stewart-politics-privilege-podcast-stardom

His books ‘The Places In Between’ and ‘Occupational Hazards, highlight that on the ground the communities he visited in the near east are made up of villages and tribes who have their own culture, customs and practices, and do not want to be westernised. The idea that imposing democratic political structures and institutions will result in a renaissance through political cohesion and the adoption by these communities of western liberal values is naive, and demonstrates a complete lack of any granular understanding of these regions by grand strategists and political leaders in the West. Rory Stewart grasped this, which is why he is a huge loss to British politics.