Private Wealth Disputes: In Conversation with Catherine Banton

What in your opinion are the most common causes of private wealth disputes?

Managing significant wealth often creates strong relationships based on trust and understanding, be it with family members, trustees or business partners. When such relationships exist, the parties don’t always clearly document the agreements they have made. It is only if a relationship turns sour or when a significant event occurs that it is discovered both parties are operating on different understandings. Trying to then establish which party has the ‘correct’ understanding can be difficult to do, potentially leading to costly and uncertain litigation.

We see this most often with succession planning and inheritance disputes, but it can happen across all parts of the family business. The best way to avoid falling into this trap is for all parties to write down at an early stage what they are expecting the other to do, what they are expecting to obtain and what will happen if their aims are not achieved. Ideally this would be in a formal document, but it can be as simple as an email exchange that sets out these basic parameters.

If you do find yourself at the beginning of a conflict, what are some things you can do and think about which might help you going forwards?

1. Seek legal advice early.It is never too early to speak to your legal adviser. A good solicitor can provide advice at an early stage that will help you avoid costly litigation. In particular, they will be able to consider the potential parties to the dispute and whether there are any procedural steps that need to be followed to protect your position, such as Beddoe applications for trustees.
2. Think about your communications.If you do become involved in the litigation process then, relatively early on, you will have to take part in disclosure. This requires you to provide the other party with all documents (including texts, voicemails, WhatsApp messages and emails) that help or hinder your case.

   Any correspondence that you have had with your lawyers will most likely be protected from disclosure under the laws of privilege. However, this is not the case for documents sent to non-lawyers. Trusted advisers to the family are not likely to be protected. Therefore, before having any communications about the dispute, it is worth considering whether you would want them shown to a judge or the opposing party. Take advice from your lawyers about how you could ensure communications are not disclosable.

3. Consider funding.The requirement to divert capital away from other business needs to fund litigation can prevent people from pursuing a claim, even if it is a strong one. It is also common for one party in a dispute to seek to ‘out-spend’ the other party to force them into a settlement position. If you have thought about how those costs might be covered at the beginning of the process, then you are likely to be in a much stronger position if litigation progresses.

   Some funding options that should always be considered are legal expenses insurance, third party funding and conditional fee or damages-based agreements.

How have recent legal and regulatory changes affected the resolution of private wealth disputes?

We are increasingly seeing a change in the legal terms on which professional advisers are acting.
All manner of professional advisers are introducing into their standard terms and conditions of business, clauses that:

1. Significantly cap their liability in monetary terms; and /or
2. Limit the time period which their clients may have to bring a claim.

At the time the terms are agreed, it is unlikely that a dispute will be at the forefront of the client’s mind. However, once agreed, these terms cannot unilaterally be varied.

Coupled with this, the UK courts are moving away from insisting on formal written documentation in order to find a binding intention. The case of Hudson v Hathway, found a man to have given up his interest in the home he had shared with his partner when he sent an email which stated that he ‘had no interest in the house’.

With modern technology allowing deals to be concluded quickly across jurisdictions on platforms such as WhatsApp, individuals need to be more careful than ever of binding themselves to terms they had not intended.

How can effective family governance structures help prevent or mitigate wealth disputes?

Effective governance structures will provide clarity over things like ownership privileges, decision-making and responsibilities to ensure the families common purpose is achieved.Families are becoming more complex, older generations are living longer and often members are living further apart geographically than ever before. Clarity over what the family is wanting to achieve and how each member can play a part in that will inevitably help in reducing the number of disagreements between members.

What do you foresee as the future trends in private wealth disputes and how can practitioners and institutions prepare for the evolving landscape?

In this digital age, the number of documents and amount of data people are creating is growing. Having the strongest position in the dispute is no longer just about who has the best legal arguments, but increasingly, who has the best legal team to cope with data management. Lawyers who have the capability to deal with complex digital disclosure are therefore essential in any large-scale litigation.

Partly due to the onerous disclosure requirements of the court, more disputes are now moving out of the court room and being resolved through negotiated dispute resolution, such as mediation, arbitration or expert determination.

There are significant advantages to these types of dispute resolution:

1. They are often quicker than court judgments, with decisions being obtained in months rather years;
2. They can be significantly cheaper than court proceedings; and
3. They can be conducted in private.

Both practitioners and institutions therefore need to be prepared to ‘think outside the box’. Coming up with an alternative solution to the conflict which doesn’t put either party in the ‘right’ or ‘wrong’ bracket.

This article was first published by Jersey Finance.