23 September 2021 - Article
The most senior judges in England have decided that an elderly man who gave his friend access to his bank account to ‘pay utilities’ actually intended his friend to have the $190,000 remaining in the account on his death.
In October 2009 Francis Lennard (formerly a successful businessman and then in his 90s) executed a Will which gave his home in Nassau Bahamas, a legacy of $55,000 and one third of his residuary estate to his friend David Moree. Legacies together amounting to $150,000 were also given to the Bahamian Salvation Army and the Bahamas Humane Society. The other two thirds of residue were left to a Dorothy Jack and a Norman Whitlock. Francis' Will named David and a Mr Pinder as his executors.
In November 2009 Francis wanted his friend David added to his account at First Caribbean (International) Bank in the Bahamas. It appears that Francis’ personal account was effectively converted into a joint account for Francis and David.
At that point, Francis and David signed the bank’s standard account opening application form for opening a joint account, which included a declaration that they had read and understood the bank's standard terms. The standard terms incorporated into the application form included a joint ownership provision at clause 20, which read:
'JOINT TENANCY: Unless otherwise agreed in writing, all money which is now or may later be credited to the Account (including all interest) is our joint property with the right of survivorship. That means that if one of us dies, all money in the Account automatically becomes the property of other account holder(s). In order to make this legally effective, we each assign such money to the other account holder (or the others jointly if there is more than one other account holder).'
The evidence about what Francis intended or knew about the standard terms was sparse. However, a member of bank staff recorded on the account opening forms that the purpose of the joint account was to ‘pay utilities’.
In January 2010 Francis revoked the legacies to charity in his will thereby increasing the size of his residuary estate.
On Francis' death in February 2010 the balance of the account was $190,000. David confirmed to his co-executor that the sums in the account formed part of Francis' estate and they both signed their executor's oaths for obtaining a grant of probate on that basis.
In March 2010 David added his wife to the joint account which, following Francis' death, was then in his sole name.
David's fellow residuary beneficiaries, Dorothy and Norman, issued proceedings in July 2013 claiming that the $190,000 remained in Francis' estate on his death and did not become David's. At trial, David's evidence was that the bank explained to him and Francis that the survivor would get all the money. No independent evidence was obtained from the bank.
The question before the Court was whether, following Francis’ death all the money in the joint account belonged to David or, having been contributed by Francis, remained in Francis' estate. Had Francis shared access to the funds with the intention that they remain his (or his estate's) or had he gifted the money to David?
Technically, Francis either made David his co-trustee of the money only (a legal joint tenancy), or he also made David an equal co-beneficiary with himself (a beneficial joint tenancy). A joint tenancy of any kind means the survivor takes all, either all the legal title (becoming sole trustee) and/or all the beneficial interest (becoming sole beneficiary).
Critically, the outcome was dependent on the meaning of clause 20 of the bank's standard terms, which Francis had agreed by signing. Did clause 20 give David the legal title to the funds in the joint account and say nothing about how he was to benefit, or did it also say he was to benefit on the same footing as Francis?
The judge at first instance decided that clause 20 dealt only with the legal title, not the beneficial interest. It was similar to transferring the legal title to a house to another without determining how the equity in the house was to be shared if at all. The default position where there is no convincing evidence as to benefit is that the legal title holders hold the benefit for the person who provided the funds, here Francis.
On appeal to the Court of Appeal of the Bahamas the Court held that there was convincing evidence that David was to benefit on the same footing as Francis which overrode the default position.
On final appeal to the Judicial Committee of the Privy Council in the UK it was held that a different analysis was required. The majority of the judges decided that the default position was irrelevant where a signed document held the answers. It was not a question of whether there was convincing evidence to override the default position but a question of what the document said. If the document dealt with the underlying benefit it was conclusive and other evidence of intention was irrelevant.
In their view, clause 20 was intended to deal with the beneficial ownership of the money in the account, not just the legal title to the account. Clause 20 was not only conclusive evidence of Francis' objective intention to benefit David, it was also the means by which he carried into effect that intention (ie his declaration of benefit in both their favours).
Two of the five judges disagreed. In their view clause 20 was intended only to deal with the legal title to the joint account, not the underlying benefit in the funds. They were not convinced that the bank, which drafted the terms, intended to involve itself in how its customers shared benefit. The bank cared only about its relationship with the customers, ie it only needed to know who had authority on the account at any time.
Whilst the majority may be right to say that the average bank customer will not know the distinction that lawyers make between legal and beneficial title to property, neither would they use language like clause 20.
The outcome may not sit right for many. It seems that Francis only intended to help out a friend in need and not to gift substantial funds to his friend (for whom he had made arrangements in his Will) or to disinherit others.
Critically, Dorothy and Norman did not argue that Francis was mistaken about the meaning of clause 20, had been pressured into signing it, or did not know what he was signing. That argument would have been difficult to sustain when the best witness, Francis, was dead. Therefore, given Francis had signed the standard terms, the Court had no means by which to say that his intention was any different to that in clause 20 which he endorsed by signing. Once the judges decided clause 20 dealt with underlying benefit and not only the legal title, that was the end of the matter.
The decision is arguably a lesson in reading 'the small print' before signing any arrangements whereby others have control of your assets. The problem is that Francis did not draft clause 20, neither did his lawyers, so it seems odd to 'impute' the bank's intention to him – especially when the language is technical and he was unlikely to have anticipated this outcome without the bank flagging it. For many, the only way to avoid the risks of being bound by such terms is to take legal advice before signing. But should the courts really be encouraging people to have to take legal advice when opening a bank account?