Talking Turkey: The doctrine of election in litigation over Bernard Matthews’s estate
On 5 September 2012 Nicholas Strauss QC (sitting as a deputy High Court judge) handed down judgment in Scarfe & Colin v Matthews LTL 6/9/2012, which concerned the question of who should bear the responsibility for paying certain taxes arising out of the exercise of French inheritance rights by three out of four of Bernard Matthews’s children.
Mr Matthews founded a turkey farming and food production business which grew into a household name. He died in November 2010, leaving his wife, three adopted children and a son by Cornelia Elgershuizen. Mr Matthews and his wife had been separated for some 30 years and Mr Matthews had been living with Odile Marteyn (‘Odile’) for around twenty years at the date of his death, both in England and in a villa (called Villa Bolinha) in the south of France. In total, Mr Matthews’s English estate was worth some £40 million and the villa was estimated at about €15 million.
He made three Wills. Under the English Will, Mr Matthews left £1 million tax free to Odile and then the residue to his natural son, George or such of George’s children that reached 25. In the event of a failure of that residuary gift the residue was to be left for the adopted children. Clauses 4 and 5 of the English Will are also relevant. Clause 4 states:
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“Out of my ready money and the clear monies to arise aforesaid my Trustees shall pay my debts funeral testamentary and administration expenses the Tax as defined by clause 5 (if any) payable and any legacies hereby or by any Codicil hereto given.”
Clause 5 states:
“In clause 4 above the expression “the Tax” shall mean any probate succession estate or other duties or fees or any tax upon capital income or wealth or any other tax of whatever nature and wherever arising which becomes payable in any part of the world (including France) as a consequence of my death (whether or not such payment shall be capable of being enforced by law) AND I DECLARE that no person interested under this my Will shall be entitled to make any claim against my Trustees in respect of my Trustees making such payment.”
The other two Wills were French, relating to French property. By one of them Mr Matthews bequeathed Villa Bolinha to Odile outright. In doing so Mr Matthews was aware that under French inheritance law his four children would be entitled to 75% of the villa on his death. In effect, under French law, Mr Matthews was free to give only 25% of the villa to Odile. Nonetheless, Mr Matthews had hoped that his children would not exercise their forced heirship rights. He left a letter of wishes that referred to the financial support the adopted children had received from him and indicating that he wished them not to exercise their rights but to let Odile take the whole of the villa.
Each of Mr Matthews’s adopted children chose to exercise their French inheritance rights, although George chose not to do so. The effect was that Odile received 43.75% of the villa and the adopted children 56.25% between them.
The hearing was not about the adopted children’s entitlement to their share of the villa; it was about the tax consequences. As a matter of French law French inheritance tax is payable not by the estate but by the beneficiaries. Therefore by reason of exercising their French inheritance rights, the adopted children were faced with a tax bill of approximately €2.6 million.
What Nicholas Strauss QC had to decide was whether the executors of Mr Matthews’s estate were obliged to pay the French inheritance tax on behalf of the adopted children under Clauses 4 and 5 of the English Will. In the event, he held that the executors did not have to pay their tax as a matter of construction of the English Will. However, he went on, obiter, to consider the doctrine of election, which had been the basis on which the case was argued.
The doctrine of election
The doctrine of election, effectively, is the equitable rule that you cannot have your cake and eat it. In Wills it applies where a testator purports to give property to X which in fact belongs to E and at the same time out of his own property confers a benefit upon E. On a literal level E would be allowed to keep his own property (to the disappointment of X) and at the same time take the benefits given to him under the Will. Equity, however, provides that a person may not accept and reject the same instrument (hence the Scottish version of the doctrine that ‘one may not approbate and reprobate’ the same instrument). E is thus put to his election: either he takes under the Will (in which case he is bound to transfer his property to X) or he elects to take against the Will, in which case he is bound to compensate X out of the benefits he receives under the Will. For example:
The testator gives E assets worth £300,000 and purports to give E’s half share of a house (value £200,000) to X. E must either:
- accept T’s £300,000 and pass his interest in the house to X (referred to as taking under the instrument); or
- keep his interest in the house and use T’s assets to the extent necessary to compensate X (referred to as taking against the instrument). Here E would pass £200,000 of T’s assets to X.
In the present case, Odile’s argument was that if the adopted children elected to invoke their French inheritance rights (eg against the French Will), then they could not rely on the English Will to have their taxes paid for them. They would have to compensate Odile for the value of the property that they prevented her from having. Re Ogilvie  1 Ch 492 is authority that the doctrine can apply where the testator attempts to give property which is not his to give because of forced heirship laws.
Despite some discussion on whether the doctrine of election ought to exist, Nicholas Strauss QC held that it was still good law and that he was bound to apply it. The adopted children made two specific points against the doctrine applying in these circumstances:
- they had no choice – they were not entitled to anything under the Wills unless and until they exercised their French heirship rights – therefore they did not have a choice between taking something under the Wills and taking something against the Wills; and
- even if the adopted children had to give up their rights under clauses 4 and 5 these could not be used to compensate Odile: the money due for tax would fall into the residue inherited by George.
The first objection has a certain appeal at first blush. It is only if they took part of the villa that they could possibly receive anything under the Wills. Therefore, they say they didn’t have a choice. However this is, in effect, the wrong choice. It is not a matter of forfeiting one interest, but of compensating the disappointed beneficiary; it is not a choice between what asset to receive but between whether to accept or reject the instrument. This is well expressed in the judgement of Neville J in Re Macartney  Ch 300 at 303: “A volunteer under a Will cannot take the benefit and at the same time wilfully defeat the expressed intentions of the testator.” Hence the Scottish formulation that one cannot approbate and reprobate, which could well be a more helpful description than ‘election’. Taking this broader view of the doctrine of election, whilst the argument looked like it might fly, it was ultimately a turkey. The adopted children were not choosing between receiving their share of the villa and their tax, they receive both but subject to an obligation to compensate Odile for her loss up to the value of what they receive under the Will. Because it is a 40% tax, Odile’s loss was greater than what the adopted children received and so the adopted children were obliged to compensate her 100% of what they received.
The second point taken was that it is a requirement of the doctrine of election that E must have received property under the instrument that can be used to compensate X. Here the adopted children did not really receive anything into their hands, what they ‘got’ under clauses 4 and 5 (if Nicholas Strauss QC was wrong on the construction) was that the executors would pay their tax for them. However, it was held that the adopted children received a real monetary benefit under clauses 4 and 5 and therefore were obliged to compensate Odile. Taking the broader view of the doctrine again, this must surely be right: the adopted children take a benefit under the Will; they fact that they don’t explicitly receive the money under clause 4 as a legacy is irrelevant.
Nicholas Strauss QC therefore held, that, if he was wrong on construction, the doctrine of election would have applied to compensate Odile and therefore prevent the adopted children from having their taxes paid out of the estate. Despite his concerns about the basis of the doctrine itself, the judge stated that “if ever there was a case for equity to intervene, this is it.”
A missed opportunity?
One final point was not taken at the hearing. It is a requirement of the doctrine of election that the disparate gifts are contained in the same instrument. At the hearing it was common ground that the three Wills ought to be treated as a single instrument for the purposes of the doctrine and the issue was disposed of in a single paragraph in the judgment (51). Indeed, in certain circumstances, two contemporaneous instruments can be treated as a single instrument for the purposes of the doctrine. For example, in Cooper v Cooper (1874) LR 7 HL 53, the doctrine was held to apply where a deed exercising a power was executed by Mrs Cooper on 5 April 1841 and her Will executed five days later.
In Douglas-Menzies v Umphelby  AC 224 (referred to at paragraph 51 of the judgement) two different Wills (one Scottish, one Australian) were executed on the same day and treated as a single instrument for the purposes of the doctrine. It is not clear from Nicholas Strauss QC’s judgement when each of the three Wills was executed. The general question arises as to whether non-contemporaneous Wills ought to be treated as a single instrument for the purposes of the doctrine. However, the judgement of Lord Robertson in Douglas-Menzies suggests that different Wills always ought to be treated as a single instrument (at 233):
“Even supposing, however, that the two trust dispositions be treated as separate and independent to the fullest extent, there remains unanswered by the respondent the real and radical objection to her case. Whether a man leaves one testamentary writing or several testamentary writings, it is the aggregate or the net result that constitutes his Will, or, in other words, the expression of his testamentary wishes. The law, on a man’s death, finds out what are the instruments which express his last Will. If some extant writing be revoked, or is inconsistent with a later testamentary writing, it is discarded. But all that survive this scrutiny form parts of the ultimate Will or executive expression of his wishes about his estate. In this sense it is inaccurate to speak of a man leaving two Wills; he does leave, and can leave, but one Will. And when the law of approbate and reprobate is applied it is this, the net result of the testamentary writings, which the doctrine protects from invasion.”
The logic behind this is clear and so, although Douglas-Menzies v Umphelby is a Privy Council case decided on Scottish law, there is a strong argument that any combination of Wills, codicils etc admitted to probate ought to be treated as a single testamentary instrument for the purposes of the doctrine. After all, a Will speaks from death and so a combination of Wills will speak at the same time and in the same voice.
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