Equiom (Isle of Man) v Velarde: Careful plans undone?

Background

Patricia Moores held a power of appointment in respect of a trust fund created by her father, the late Sir Cecil Moores. The power allowed Patricia, who was life tenant of the fund, to appoint the fund among her children and remoter issue. Patricia had three children: Christian, Rebecca and Matthew.

In 1981, Patricia executed a deed of appointment in favour of Christian, Rebecca and Matthew equally. She reserved a power of revocation.

In 1997, Patricia executed a further revocable deed of appointment in favour of Christian and Rebecca, excluding Matthew (the “1997 Appointment”). At the time, Matthew was going through a divorce.

In 2007, Patricia made a will (the “2007 Will”), which stated:

"I leave devise bequeath and appoint the whole of my real estate and the rest residue and remainder of my personal estate wheresoever situate and of whatsoever kind of or to which I shall be seised possessed or entitled at the date of my death or over which I shall have any power of testamentary disposition whatsoever after the payment thereout of my just debts funeral and testamentary expenses unto my children Peter Christian Velarde Matthew Julian Velarde and Rebecca Velarde" (emphases added).

Patricia died in 2017.

The trustees of the settlement brought an application for a declaration as to whether or not the 2007 will revoked the earlier 1997 Appointment. The application was contested by Christian and Matthew. Both parties accepted that an intention to exercise the power of revocation needed to be apparent; it was not enough to simply show an intention to appoint.

Christian’s primary submission was that the words in the 2007 will were too general to effect a revocation: they did not refer to the power to revoke, the settlement, the 1997 Appointment or the property subject to it. Christian placed particular reliance on the fact that the clause was a residuary gift, designed to take effect at the date of death to sweep up property which has not otherwise been disposed of. At the time that she made the 2007 will, Patricia could not know what powers might be vested in her.

Matthew placed reliance on the fact that Patricia only had one power of appointment.

The 2007 will was governed by Manx law. Extrinsic evidence was admissible under section 19 of the Wills Act 1985, which is identical to section 21 of the Administration of Justice Act 1982. Unfortunately, the solicitors’ file relating to the preparation of the will had been destroyed, as this clearly may have been a source of highly relevant evidence as to Patricia’s intentions at the time.

First decision

In Equiom (Isle of Man) Ltd v Velarde [2021] EWHC 1528 (Ch), Deputy Master Dray determined that, as a matter of construction of the terms of the 2007 will, Patricia did intend to revoke the 1997 Appointment and that, therefore, the fund was held for Christian, Rebecca and Matthew equally.

In doing so, the deputy master concluded that the authorities supported the principle that revocation will be implied if a disposition in general terms would otherwise be nugatory or idle. He emphasised that there was: “a general trend, readily discernible from the authorities, against a conclusion which would leave aspects of a will redundant and shorn of consequence”.

The deputy master found that, to the extent that it was of any assistance, the extrinsic evidence supported his interpretation.

The appeal

Christian appealed and the matter came before Mr Ashley Greenbank (sitting as a judge of the High Court).

Reviewing the deputy master’s decision and the authorities, the judge determined that the deputy master’s principle (as stated above) went too far, as did his suggestion that the court should seek to find a construction that does not render some words of the will otiose, particularly in the context of a residuary gift. The better view, he said, was that: “the question turns on the words used and the context in which they are used”.    

The judge, however, dismissed the appeal. Whilst the judge did not agree with some of the deputy master’s reasoning, he did not consider the decision to be unsustainable based on the wording of the 2007 will and the fact that Patricia only had one power of appointment. He also did not give any weight to evidence from one of the trustees, a Manx advocate, that the wording in the will was not uncommon for Manx wills.

Comment

Elements of the appeal decision are welcome in that they reverse some of the principles that the deputy master drew from the authorities, which we respectfully suggest were incorrect.

However, the decisions in Velarde may still be concerning for private client practitioners given the very real possibility that Patricia gave no thought whatsoever to the prospect that the 2007 will would revoke the 1997 Appointment.

In light of the decisions, will drafters should take extra care to explore whether or not their clients have powers of appointment/revocation. If a client has made earlier revocable appointments, their will should ideally expressly state whether or not it is intended to revoke the same, otherwise careful lifetime appointments could be revoked by accident. As ever, full attendance notes should be kept.

Click here to read the full judgment.

Simon Pedley, Ben Reeves, and Penelope Reed QC acted for Christian in this case.