Long v Rodman & Ors

On 5 February 2010 Mr David Long was appointed as deputy for the property and affairs of Mrs Arline Rodman under the Mental Capacity Act 2005. The question raised by the present application is whether he should be replaced in that role. Mr Jared Shafer, who is now the general guardian of the estate of Mrs Rodman under an order made by a Court in Nevada, proposes that he should become deputy too, in Mr Long’s place.

Mrs Rodman was born in 1932. She has always been a citizen of the United States, as was her late husband, Mr Norman Rodman. In the 1970s, however, the Rodmans moved first to Switzerland and then to London, where they lived at 4 Chesterfield Hill. They had four daughters: Linda, Barbara, Debra and Roberta.

By the time he settled in London, Mr Rodman had substantial assets. His investments took the form of certificates of deposit (or “CDs”). A web of offshore entities was established to deal in and collect income on the CDs. In total, some 21 entities were created in Panama and Liechtenstein. The various entities were used to facilitate systematic evasion of both British and American tax liabilities.

In 2003, Mr Rodman made a will naming his wife as the sole beneficiary and executrix of his estate. By the time he died in 2008, however, Mrs Rodman was under mental incapacity as a result of advanced Alzheimer’s Disease.

In the years before his death, Mr Rodman had given his daughters various directions as to what should happen if he died. Among other things, sums of $4 million and $5 million were to be paid respectively to a Mr Vincenzo Basanese and a Mr Stephen Saunders. A sum of $15 million was to be set aside to provide for Mrs Rodman’s care.

Mr Rodman’s estate is estimated to have had a gross value of about $133 million when he died. Following his death, Mr Basanese and Mr Saunders received payments of $4 million and $5 million, and a sum of $15 million was deposited for Mrs Rodman’s care. The majority of the remaining CDs (worth some $100 million) were shared between the four daughters without any personal representative having been appointed, without any effective consent from or on behalf of Mrs Rodman and without any provision having been made for outstanding tax liabilities. In October 2008, however, the US Internal Revenue Service (“the IRS”) began to inquire into Mr and Mrs Rodman’s tax affairs as a result, it seems, of third party disclosure of two of the Liechtenstein entities.

In the course of 2009, two of the Rodmans’ daughters (Linda and Barbara) took proceedings for the appointment under the Mental Capacity Act 2005 of an interim property and affairs deputy for their mother. Mr Long was ultimately appointed as property and affairs deputy on 5 February 2010. By a recital to the Court of Protection’s order, all four daughters recorded their willingness to co-operate fully with Mr Long.

As had been intended when Mr Long was appointed as deputy, he took steps to become administrator of Mr Rodman’s estate. On 15 June 2010 he was appointed as administrator of the estate with the 2003 will annexed.

On 6 July 2010 an order was made in the Court of Protection providing for Mrs Rodman to be transferred to a property in Bedford, Westchester County, New York. There was reference in the order to the fact that a representative of the Official Solicitor had visited the property in question. The order also included an undertaking by the four daughters that, when their mother had returned to the United States, they would apply to be appointed as her welfare guardians and take appropriate steps to bring about the appointment of a “financial guardian (or conservator)”.

In the event, without any further order having been made by the Court of Protection (or, it appears, any other Court), Mrs Rodman was moved to Nevada, to live in Las Vegas. It is not clear whether Mrs Rodman was taken to New York State at all. Mr Shafer has both said that Mrs Rodman “was not moved to Bedford in New York State” (in a witness statement of 27 May 2011) and referred to Mrs Rodman’s “move from New York to Nevada” (in a witness statement of 13 October 2011). However, it appears from Mr Shafer’s evidence that he does not have personal knowledge of what occurred (he speaks of having been told by the daughters that they “had” moved their mother to Las Vegas), and no direct evidence from any of the Rodmans’ daughters is available.

On 25 January 2011 Mr Shafer was appointed to be the general guardian of the estate of Mrs Rodman by the District Court of Clerk County, Nevada. In practice, he does not appear to have had to do all that much in Nevada: he explains in one of his witness statements that the only funds that come into his hands are social security benefits of $2,100 a month. He has, however, taken a very active interest in both the English deputyship and the administration of Mr Rodman’s estate. He has been provided with funding for litigation in this country by the Rodmans’ daughters.

By an application issued on 15 March 2011, Mr Long applied for an order for the sale of the Chesterfield Hill property. On 28 April Mr Shafer asked that Mr Long’s application be stayed “pending completion of an appraisal of the advantages and disadvantages” of sale. An order authorising sale had in fact already been made by Senior Judge Lush on 21 April, but both Mr Shafer (by an application notice dated 31 May) and two of the daughters (Debra and Roberta) asked that that order be reconsidered. Mr Shafer has not pursued his objection to a sale (as a result, he has explained, of being provided with further information by Mr Long), but one of the daughters (Debra) is still seeking to have the order for sale reopened.

The application notice of 31 May 2011 asked not only for a reconsideration of the order for sale, but for Mr Shafer to be appointed as deputy in place of Mr Long. Mr Shafer said in the witness statement in support of the application that he was “of the view that it could be in the best interests of Mrs Rodman for [him] to have responsibility for all of her affairs”.

On 1 July 2011 Mr Shafer issued proceedings in the Chancery Division for (a) Mr Long to be replaced as Mr Rodman’s personal representative and (b) bills which Charles Russell had rendered to Mr Long for work in connection with the deputyship and Mr Rodman’s estate to be assessed pursuant to section 71 of the Solicitors Act 1974. Those proceedings remain to be determined.

By September 2011 Mr Shafer was also relying on matters relating to the assessment of costs as justification for Mr Long’s removal as deputy. On 29 September 2011 Mr Shafer made a further witness statement in support of his application to be appointed as deputy in place of Mr Long. He gave as the grounds:

“that it is in [Mrs Rodman’s] best interest for the legal costs incurred by Mr Long acting as her Deputy and also as personal representatives of the estate of Mr Rodman to be scrutinised and, if thought appropriate assessed by the courts”.

The order by which Mr Long was appointed as deputy provided for his costs to be assessed on an annual basis. Charles Russell submitted their bill for 2010 for assessment on 26 June 2011. The bill is, I gather, in the hands of the Supreme Court Costs Office.

Power to vary or discharge the order appointing Mr Long is conferred by section 16(7) of the Mental Capacity Act 2005. Since decisions under the Act must be made in the best interests of the patient (see section 1(5)), the ultimate question must be as to what is in Mrs Rodman’s best interests. In determining that, all the relevant circumstances must be considered (section 4(2)). I must, in particular, take into account the views of “anyone engaged in caring for the person or interested in [Mrs Rodman’s] welfare” (section 4(7)(b)). The persons “interested in [Mrs Rodman’s] welfare” can be expected to include her four daughters.

I am entirely unpersuaded that it is in Mrs Rodman’s best interests for me to make an order removing Mr Long as deputy.

In the first place, Mr Long is much better qualified than Mr Shafer to act as Mrs Rodman’s deputy. Mr Shafer has evidently had considerable experience as a fiduciary in Nevada, latterly providing such services in the areas of probate, guardianship and trust administration through Professional Fiduciary Services of Nevada, Inc. However, there is no evidence that he has previously been involved in a case with a British dimension, nor that he has in the past otherwise acquired experience of English Court procedure or Court of Protection practice. In contrast, Mr Long has had many years’ experience of English law and practice, formerly as a partner in Charles Russell and now as a consultant to the firm. His experience includes, in particular, matters relating to the administration of estates and the Court of Protection.

Further, Mr Shafer’s approach to date has not, I am afraid, been such as to inspire confidence that he would be an appropriate deputy. It might have been hoped that Mr Shafer would seek to collaborate with Mr Long, but that is not the impression I get from the correspondence. From the outset, the letters which Mr Shafer’s solicitors, Reed Smith, have sent on his behalf have been such as might be sent in the context of litigation, and I understand that they were in fact written by members of the firm’s litigation department. I am not surprised that Charles Russell expressed disappointment at the tone and the “hostile approach”. A mass of information and documentation was demanded, in relation to Mr Rodman’s estate as well as the affairs of his wife, and, when information was provided, Reed Smith promptly asked for more. To take one example, Reed Smith asked in their first letter for a “short summary” addressing, among other things, “an issue over the extent to which Mr Rodman was beneficially entitled to a number of bearer bonds”. Charles Russell devoted a couple of hundred words of their lengthy response to their thinking on this aspect. Reed Smith nonetheless called for Charles Russell to “respond fully”, without even explaining why they considered Charles Russell’s comments inadequate. There is no evidence that Mr Shafer needed any more information in order to report to the Nevada Court, and I think it very unlikely that he did, especially as the request in question related toMr Rodman’s estate whereas Mr Shafer had been appointed as Mrs Rodman’s guardian.

Mr Ulick Staunton, who appeared for Mr Shafer, suggested that I should make an order for Mr Long to be removed as deputy regardless of whether I was satisfied that Mr Shafer was a suitable replacement. If Mr Shafer was not appropriate, he said, someone else should be found. However, the application notice asks that Mr Shafer be appointed as deputy in place of Mr Long and, perhaps more importantly, no alternative candidate has been put forward.

In any case, any change of deputy, whether to Mr Shafer or someone else, would inevitably result in costs being incurred as the new deputy and, probably, lawyers acting on his behalf familiarised themselves with Mrs Rodman’s affairs. Mr Staunton suggested that Mrs Rodman’s own affairs are relatively straightforward, but (a) there is no evidence about what the costs would be likely to be, (b) Mr Shafer has already taken his role as guardian of Mrs Rodman’s estate as justifying extensive inquiries into Mr Rodman’s estate and (c) Mr Staunton accepted during submissions that it was very possible that Mr Shafer’s role might extend to scrutinising the administration of Mr Rodman’s estate.

Another point is that it could prove inconvenient and expensive to have different people handling Mrs Rodman’s affairs and Mr Rodman’s estate. I understand that, before becoming deputy, Mr Long had detailed discussions with solicitors acting for the Rodmans’ daughters in which it was accepted that Mr Long should become administrator as well as deputy and that Charles Russell should be instructed to act for him in both capacities. There was obvious sense in that. There is, moreover, good reason to fear that, were Mr Shafer deputy but not administrator, he would nonetheless seek to involve himself in matters relating to Mr Rodman’s estate. As already mentioned, Mr Staunton recognised that Mr Shafer might want to scrutinise the administration of the estate, and his appointment as deputy could be construed as a platform to do so. To my mind, this would be a recipe for conflict and cost.

These particular problems could be overcome if Mr Long were replaced as both deputy and administrator, but that would engender other difficulties. The new deputy/administrator and his lawyers would have to inquire into Mr Rodman’s affairs as well as Mrs Rodman’s, thus increasing the handover costs. Moreover, it might well be difficult for Mr Long’s replacement to take over satisfactorily when Mr Long is, as his counsel, Mr Andrew De La Rosa, said, “midstream” (especially as regards tax liabilities). Mr Long has said this in a witness statement:

“As a matter of good practice I would not normally seek to continue as the personal representative of an estate in circumstances where beneficiaries and/or members of the deceased’s close family are opposed to my remaining personal representative and have suggested an appropriate alternative course. However in the present case I do not believe the suggestion that I be removed is well-founded and it has been made at a stage when I am engaged on the exercise of settling estate fiscal liabilities ….”

Turning to Charles Russell’s fees, by the end of February 2011 Mr Long had incurred legal costs of £304,180 in respect of the deputyship and £1,093,998 in respect of the administration of Mr Rodman’s estate. However, some £81,000 of the £304,180 was attributable to disbursements (principally barristers’ fees) and VAT, leaving a balance of only about £223,000. Similarly, about £461,000 of the £1,093,998 derived from disbursements (including payments to both barristers and accountants) and VAT, leaving a balance of roughly £632,900.

These are large sums, but they are not obviously excessive. Mr Long has explained that the deputyship costs were largely incurred in relation to residence proceedings. With regard to the administration of Mr Rodman’s estate, Mr Shafer has himself recognised that the estate is substantial, that Mr Rodman’s affairs are complicated and that “substantial legal costs” will have been incurred. Costs have evidently been incurred in relation to tax-related issues in particular. Mr Long has described the process of settling the tax liabilities as “complex and very difficult” and explained that the principal reasons for the size of the costs include (a) the investigations into Mr Rodman’s affairs that need to be completed in order to arrive at a settlement with HMRC and prepare the ground for disclosure to the IRS and (b) the sheer number of points that have been raised on behalf of the Rodmans’ daughters concerning the tax liabilities. The costs have also, Mr Long has observed, been raised by the need to deal with other matters raised by the daughters (for example, issues arising from the attempt by one of the daughters to collect a boat which was said to be an asset of the estate or demands made to occupy the Chesterfield Hill property). It is noteworthy that two of the Rodmans’ daughters had, I am told, each incurred legal costs of more than $1 million by December 2010.

It is also of some significance that Mr Long has given evidence to the effect that he has reviewed the deputyship and administration costs at every stage before authorising payment and satisfied himself that the amounts incurred were reasonable. Mr Staunton pointed out that Mr Long is a consultant to Charles Russell and so could be said to be in a position of conflict, but I do not think that deprives his evidence of all weight, especially as Mr De La Rosa confirmed to me on instructions that Mr Long’s remuneration is not linked to Charles Russell’s profits.

Whatever questions there could be as to Charles Russell’s costs, they do not require an immediate change of deputy. So far as costs related to the deputyship are concerned, these fall to be assessed by the Court already. As mentioned above, the order appointing Mr Long as deputy made provision for costs to be assessed annually.

Turning to costs arising from the administration of Mr Rodman’s estate, Mr Staunton argued that appointment as deputy would enable Mr Shafer to apply for such costs to be assessed under section 71 of the Solicitors Act 1974. On such an application, the Court would be required by section 71(4) to have regard to the provisions of section 70 of the Act so far as capable of being applied to the application. Those provisions, among other things, lay down time-limits. In particular, section 70(4) stipulates that assessment cannot be ordered “on an application made … after the expiration of 12 months from the payment of the bill”. This meant, Mr Staunton submitted, that Mr Shafer could lose the ability to challenge bills rendered by Charles Russell unless he takes over from Mr Long as deputy now.

For his part, Mr De La Rosa did not accept that section 71 of the Solicitors Act 1974 would entitle Mr Shafer to ask for bills relating to the administration of Mr Rodman’s estate to be assessed even if he were appointed as deputy. For present purposes, however, I do not need to decide whether Mr De La Rosa is right about this. In the course of argument, Mr De La Rosa confirmed on behalf of Charles Russell that they would not invoke the time-limits for which section 70 of the 1974 Act provides to preclude an assessment of their costs. That being so, there can be no risk of any right to assessment being lost unless Mr Long is replaced as deputy at once.

A further point is that it is hard to see how Mr Shafer’s application for Mr Long to be replaced as deputy can be motivated by cost concerns. I was told by Mr Staunton that by the date of the hearing Mr Shafer had himself incurred legal fees of nearly £165,000 (excluding VAT). While there is no evidence as to his fees, Mr Shafer will presumably be charging for his own time too. He will doubtless also have caused Mr Long to incur substantial additional costs.

As Mr Staunton pointed out, in August of last year all four daughters signed a letter stating that they had “lost confidence in Mr Long” and wished to have him replaced as both deputy and personal representative. However, the letter does not explain why the daughters have “lost confidence in Mr Long”, and there is no evidence from any of them. In all the circumstances, I do not think the daughters’ views help much.

Overall, the balance seems to me to come down heavily in favour of retaining Mr Long as deputy.

I shall dismiss the application for Mr Long to be replaced as deputy.