Where there’s a will
28 July 2008
19 March 2013
14 May 2013
22 January 2014
22 August 2013
Principles applicable to legal costs incurred in trust-related proceedings in Jersey by trustees, other fiduciaries and beneficiaries
1 October 2013
A recent ruling by the Royal Court of Guernsey has modified the law governing guardianship, ushering in a quasi-statutory wills regime in the process.
This recent case dealt with by Royal Court of Guernsey dramatically changed the law of Guernsey in relation to guardianship. The case related to whether the assets of a Guernsey-domiciled person – the patient – who had a will but who was under curatelle – that is, guardianship – could be placed in a settlement in order to minimise potential future inheritance tax liability.
Guernsey has no history, tradition or legislation providing for the equivalent of English statutory wills.
The facts in the case
The patient was Guernsey-domiciled and had amassed wealth through various businesses. He was unable to manage his own affairs for reason of infirmity of mind. A curateur or guardian – the equivalent of a receiver in England and Wales – had been appointed to manage the patient’s affairs under the supervision of a family council and the Royal Court.
Although the patient had a valid will, the guardian sought the Royal Court’s direction as to the conduct of the administration of the affairs of the patient. In particular, the guardian sought the approval of the Royal Court to place and to hold the assets of the patient in a settlement. The primary objective of the proposed settlement was to minimise the potential inheritance tax liability for the heirs of the patient.
All the major residuary beneficiaries of the patient’s will had indicated their consent to the proposed arrangement because of the potential tax savings. It was intended that they would all be discretionary beneficiaries of the proposed settlement.
The court had to address two main issues. The preliminary question was whether the court had jurisdiction and power in the matter under its supervisory role to give directions to the guardian and, where necessary, to approve the creation of a settlement for the patient. On this point, the following factors were deemed relevant:
• Guernsey, like most common law jurisdictions, does not have a statutory will regime.
• The patient had a will in place, which was executed while he was capable and had testamentary capacity.
• The residuary beneficiaries of the will did not stand to ‘benefit’ in the normal sense from the arrangement, as their entitlement under the will would effectively be exchanged for a discretionary interest in a settlement. Nor would the proposed settlement benefit the patient in the normal sense, since his estate would effectively pass into the hands of a third party. The proposed settlement could therefore not in itself be said to be ‘in the best interests’ of the patient.
• Under Guernsey law, the guardian’s role had always been seen as asset-protecting and enhancing rather then dispositive.
The recent judgement deals with the preliminary question. The assistance of Her Majesty’s Procureur was sought as amicus curiae because of the unusual nature of the matter, the substantial amount of funds proposed to be settled and the absence of directly relevant Guernsey case law.
The court found that the supervisory jurisdiction of the Royal Court in curatelle matters included a power to give authority to a curateur in suitable cases to make a settlement of a patient’s assets. Such a settlement may include the whole or a substantial part of the patient’s assets.
In his judgment, the judge held that this approach properly reflected the changes in social conditions in Guernsey and that the customary law of Guernsey should be amended accordingly.
Although Guernsey law is based in large part on Norman customary law, curatelle is a principle derived from Roman law. The law in Guernsey is not changed lightly. It is fair to say that it had been generally assumed that the law relating to curatelle was one of those unwritten, customary laws of Guernsey introduced by usage having been observed for several centuries.
Earlier important case law in Guernsey had established that, while the coutume – that is, customary law – does develop over the centuries, the fundamental and common law of the island cannot be altered by judicial decision.
The guardian’s role had always been seen as one of enhancing and protecting the assets of the patient and acting in the best interests of the patient. It was questionable whether the guardian had dispositive powers and could therefore disabuse himself of the need to act in the best interests of the patient.
It was also felt that to allow such dispositive powers would be a way of circumventing Guernsey’s forced heirship rules, which
limit testamentary disposition to certain nominated classes of beneficiaries.
Notwithstanding the above, the Royal Court took the view that Guernsey customary law has to evolve in the way most appropriate to Guernsey, its population and its society. Further, that this evolution can be based, to some extent, on the development of the common law, and even the statutory law, of England and Wales, and sometimes on the laws of modern France and of Commonwealth countries.
In arriving at its decision, the Royal Court looked to Scotland, a jurisdiction that had also derived its principles of curatelle from Roman law, and took into account cases in which the court had dealt with issues similar to those raised in this case. The Royal Court found that the law of curatelle had developed sufficiently in that jurisdiction to allow the guardian to have dispositive powers.
The judgment is to be welcomed, as it introduces a quasi-statutory wills regime into Guernsey. Furthermore, the regime is likely to see considerable use by those of the many wealthy individuals who come to Guernsey to see out their days who may be unfortunate enough to require a guardian to settle their affairs in a tax-efficient way.
Christian Hay is head of dispute resolution at Collas Day and Theo Albright an associate at Collas Day Fiduciary