Ireland: Disclaimers: Recent Case Law Issues

Introduction

The law is not so absurd as to force a man to take an estate against his will (Townson v Tickell [1819] 3 B. & Ald. 31) is a well-known judicial pronouncement from the 19th century. This principle underpins the legal operation of disclaimers, which, along with deeds of family arrangements, are regularly encountered by advisers dealing with testate and intestate estates and their beneficiaries.

Although the taxation consequences of disclaimers have a statutory footing, the legal consequences are largely rooted in historical English case law and academic commentary. The recent decision of Twomey J in Kieran Egan and Michael Egan Junior v Helen Egan and Alan Egan [2023] IEHC 259 is therefore to be welcomed in that, for the first time in this jurisdiction, the High Court has considered the legal effect of a disclaimer in favour of a third party.¹

Facts of the Egan Case

Under the terms of a will dated 25 September 1975 Thomas Egan bequeathed a 36-acre family farm in Shannonbridge, Co. Offaly ("the farm"), to his nephew, Michael Egan Senior, for his life, with remainder to Michael Egan Senior's two oldest sons, Michael Egan Junior and Kieran Egan.

Michael Egan Senior was appointed sole executor and trustee of Thomas Egan's estate.

Thomas Egan died on 13 December 1984.

Under the terms of a will dated 4 February 2014 Michael Egan Senior bequeathed the farm to his youngest son, Alan Egan, absolutely. Alan Egan and Michael Egan Senior's wife, Helen Egan, were appointed executors of Michael Egan Senior's estate.

Michael Egan Senior died on 22 January 2015.

Notwithstanding that Michael Egan Senior only had a life interest in the farm, Alan Egan, as executor of his late father's estate, assented to the registration of the farm in his own name as absolute freehold owner on foot of the bequest contained in his father's will.

Alan Egan's justification for accepting a bequest of the full freehold interest in the farm from his father's estate was the existence of a one-sentence document, which the court in its judgment described as "the release", which Michael Egan Junior and Kieran Egan had signed, it was claimed, back in 1990.

The release signed by Michael Egan Junior, which is reproduced here in full, read as follows:

The same form of release was also signed by Kieran Egan.

Michael Egan Junior and Kieran Egan brought proceedings shortly after their father's death and the registration of their brother as owner of the farm.

They claimed that they became aware of the terms of their uncle's will, in which they were left the remainder interest in the farm, only shortly after their father's death in 2015, which was more than 30 years after their uncle's death. They also denied that they signed the release or, if they had, argued that the release was invalid and of no legal effect.

Much of Twomey J's judgment focussed on the curious nature of the release. He scrutinised its form and content, and his comments in this regard should make salutary reading for advisers when it comes to ensuring that certain basic formalities are always complied with when drafting legal documents.

Some of the curious features of the release that Twomey J highlighted in his judgment were:

• No recitals were included in such a significant document.
• A one-sentence document only was being used to achieve a significant release and a transfer.
• The document did not include the language that one would expect in such a document.
• The document included no direct reference to the transfer of the farm, which was the purpose of the release.
• The release was not dated or witnessed.
• The release was not stated to be a deed or stamped or sealed even though dealing with land.

After considering these issues Twomey J moved on in his judgment to deal with the substantive legal effect of the release on the basis that the determining factor in the case was the substance of what the release was purporting to achieve as a matter of law.

Before we consider this part of the decision it is worthwhile reviewing the tax effect of a disclaimer, which is what the court concluded that the release was.

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Footnote

1. There is a dearth of Irish case law on disclaimers generally. In MIBI v Stanbridge & Ors [2008] IEHC 389 Laffoy J does consider whether a disclaiming beneficiary had a benefit or right before the moment of disclaimer in the context of a claim by MIBI against monies in an estate to which certain beneficiaries were entitled before disclaiming to put them out of reach of creditors.

Originally Published by Irish Tax Review Issue 3 (2023) © Irish Tax Institute.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.