Re Pqr, Deceased

• Jurisdiction: Bermuda
• Judgment Date: 06 August 2015
• Neutral Citation: [2015] SC Bda 53 Civ
• Date: 06 August 2015
• Docket Number: CIVIL JURISDICTION 2014 No: 256
• Court: Supreme Court (Bermuda)

[2015] SC (Bda) 53 Civ

In The Supreme Court of Bermuda

CIVIL JURISDICTION 2014 No: 256

In the Matter of The Estate of PQR, Deceased

Mr. Ben Adamson, Conyers Dill and Pearman Limited, for the Plaintiff (‘the Executor’)

Mr. David Kessaram, Cox Hallett Wilkinson Limited, for the 1 ^st Defendant (‘W’)

Ms. Fozeia Rana-Fahy, MJM Limited, for the 2 ^nd Defendant (‘D’)

(in Camera)

Introductory

1 The Executor issued an Originating Summons on June 23, 2014 seeking directions on certain questions of construction relating to the Testator's homemade Will dated April 19, 2011 (‘the Will’). There are only two beneficiaries, the Testator's widow (W) and his daughter (D). They each took different views as to the terms and effect of certain clauses in the Will. The Testator died in 2013 while resident and domiciled in Bermuda.

2 The questions placed before the Court for determination fell into two categories. There were two questions affecting beneficiary entitlement and a single important question of trust administration. The two beneficiaries each contended for their respective positions on the entitlement issues in question while the Executor took a substantially neutral stance in relation thereto. The Executor only fully addressed the administration issue.

3 The first of the two entitlement issues was whether or not the Testator's rights in relation to certain real property in Bermuda under, inter alia, sale and purchase agreements entered into by him in 1997 and 2010 and two mortgages in 1997 (the ‘Bermuda Property’) passed to W under clause 8 of the Will (Issue 1). The second of the two entitlement issues was whether or not certain tax liabilities paid by the Executor (‘the US Tax Payments’) in relation to certain US assets devised equally to W and D should be treated as an estate expense or an expense solely payable by D (Issue 2).

4 The administration issue concerned the somewhat anomalous clause providing for Trustees to also administer the Estate. This issue was, in the event, the least contentious one (Issue 3).

Overview: the relevant testamentary provisions

5 Clause 3 of the Will provides that the ‘ Will be governed by and shall be construed in accordance with the laws of Bermuda and that the courts of Bermuda shall be the forum for the administration thereof.’ Clause 4 appoints the Plaintiff as executors of the Will. Clauses 5 to 10 contain the various gifts.

6 Clause 5 gives all of the Testator's interest in the ‘ New York Real Property’ to W ‘free of any taxes or duties’. The ‘ Vermont Real Property’ is also given to W ‘ free of any taxes or duties’. In the event that the Vermont Real Property is owned by a company then its shares are to be owned by W. Clause 7 requests that W leave the Vermont Real Property to D by her own will. By Clause 8 (‘Bermuda Real Property’), the Testator bequeaths ‘ free of any taxes or duties all my interest in any real property situate in the Islands of Bermuda’.

7 The Testator gives ‘ 50 per cent of all my cash and investments’ to W and D respectively under clauses 9 and 10. The latter clause further explains: ‘ Thus an equal percentage goes to my wife and daughter’. Then clause 11, incongruously in light of clause 4, appoints K, a United States lawyer, any surviving partner, F or such other person as the executors may appoint:

‘ to be the trustees of my estate as to investments or property both real and personal, other than money in their absolute discretion to sell, call in or convert all or any of such investments or property into money with power to postpone such sale, calling in and conversion and to permit the same to remain as invested and upon trust as to money with a like discretion to invest the same in their names or under their control in any of the investments authorized by my Will or by law with power at the like discretion from time to time to vary or transpose any such investments for others so authorized; to pay such of my debts, funeral, testamentary and administrative expenses (including all duties and taxes wheresoever payable on or by reason of my death) and to give effect to legacies.’

8 The latter clause appears to be largely duplicative of the functions traditionally assigned to executors under Bermuda law.

Findings on Issue 1: did the Testator's interest in the Bermuda Real Property pass to W under clause 8 of the Will?

The nature of the Testator's interest in the Bermuda Real Property

9 The main controversy is whether not the Testator possessed at his death any interest at all in the Bermuda Real Property capable of passing to W under clause 8 or whether such interests pass instead under clauses 9 and 10 as ‘investments’ to W and D in equal shares.

10 The Bermuda Real Property has two titles, because it consists of the main property and an adjoining small piece of land used at all material times primarily as parking space. However, the Testator (as ‘Purchaser’) entered into a sale and purchase agreement on or about April 16, 1997 relating to both Bermuda properties (the ‘1997 SPA’). The following provisions of the 1997 SPA were referred to in argument:

• (a)General Condition 2: ‘ As the Purchaser is a restricted person as defined in clause 4 hereof, Completion shall take place on before thirty days after the attorneys for the Purchaser receive written notification of the grant of the of a License by the Ministry of Labour and Home Affairs…’;

• (b) General Condition 4: ‘ As the Purchaser is a restricted person within the meaning of the Bermuda Immigration and Protection Act 1956 (as amended) he shall at such time as Property has an Annual Rental value making it available for non-Bermudian ownership with all due diligence and despatch cause an application to be made on his behalf to the Minister of Labour and Home Affairs for a license to acquire the Property for private residential purposes and will use his best endeavours to procure the grant of such license. If such license is not granted to the Purchaser within a period of six (6) months from the date of application or within such further period as the Vendor and the Purchaser shall agree in writing then the provisions of Special Condition 9 shall apply’;

• (c) General Condition 20(iv): ‘ Wherever in this agreement the context so admits the expression the ‘vendors” the “Purchaser” or the “Agent” shall mean and include their respective executors, administrators, assigns and successors in title (as the case may be)..’;

• (d) General Condition 20(v): ‘ The Purchaser shall be entitled to assign or otherwise dispose of the rights benefits and obligations contained in this Agreement to any other person or body corporate’;

• (e) Special Condition 1: ‘ Within thirty (30) days of the date hereof…The Vendors shall grant a lease of the Property to the Purchaser for a period of five (5) years at a nominal rental value.The Lease will contain express provisions permitting the Purchaser to carry out leasehold improvements to the property…’;

• (f) Special Condition 2: ‘ Once the Lease is fully executed and in place, the Purchaser will pay to the Vendor the deposit and balance of the Purchase Price…(“the Loan”)…As security for the Loan and contemporaneously therewith the Vendors will execute a first legal mortgage upon the Property in favour of the Purchaser. Such Mortgage…will secure the Loan and any further sums expended by the Purchaser in carrying out leasehold improvements to the Property’;

• (g) Special Condition 9: ‘ If for any reason the Purchaser's license to acquire the property is not granted, and if the Purchaser is unable or unwilling to assign or otherwise dispose of the rights, benefits and obligations contained in this Agreement, then the Vendor and Purchaser hereby agree that the property shall be offered for sale upon the open market at a mutually agreed price but being not less than the Purchase Price plus the cost of leasehold improvements made to the Property by the Purchaser…’;

• (h) Special Condition 13: ‘ In the event of the death of the Purchaser prior to completion of the purchase of the property contemplated herein, then this Agreement shall be binding upon the Estate Representatives of the Purchaser and such person shall be entitled to all of the benefits and burdens of this Agreement’;

• (i) Special Condition 16: ‘ The Purchaser shall be fully entitled to assign or otherwise dispose of the rights, benefits and obligations of this Agreement without the written consent of the Vendor.’

11 Two mortgages in respect of each of the two portions of the Bermuda Real Property were entered into in favour of the Purchaser on May 19, 1997 as contemplated by the 1997 SPA. Leases were also entered into on or about May 19, 1997, May 19, 2002, May 19, 2007 and May 19, 2012 although only a copy of the latter document was referred to at trial.

12 A new shorter form Sale and Purchase Agreement was entered into as of April 10, 2010 (the ‘2010 SPA’) by the Testator as purchaser in relation to the larger portion of the Bermuda Real Property. The Purchase Price apparently incorporated the costs of the leasehold improvements which had now been made to the property. The 2010 SPA also stated that the term ‘Purchaser” and “Vendor” included ‘their respective successors in title and permitted assigns’ (clause 2.10). Special condition 4.6 provided:

‘ The [Purchaser] is a Restricted Person within the meaning of the Bermuda Immigration and Protection Act (as amended) and shall with all due diligence and despatch cause an application to be made on his behalf to the Minister of Labour and Home Affairs for a license to acquire the Property for private residential purposes and will use his best endeavours to procure the grant of such license. If such license is not granted to the Purchaser within a period of one (1) year from the date of application (or within such further period as the Vendor and the Purchaser shall agree in writing)...