State of play

McCabe v McCabe

This case concerned a bitter dispute between two brothers over the validity of their late mother's second will, which disinherited the younger son.

Mrs McCabe made her first will in 2007, leaving her estate to her sons Stephen and Timothy equally. The brothers had a hostile relationship, which escalated when Timothy initiated a police investigation into his mother's finances, implicating Stephen.

Mrs McCabe became so distressed that she stopped seeing Timothy and shortly afterwards, in 2011, she made a new will leaving her entire estate to Stephen. Dr A, a specialist in geriatric medicine, attended on Mrs McCabe and concluded that she had capacity to execute the will, before witnessing the will along with a member of the public.

On Mrs McCabe's death, Timothy challenged the second will, effectively forcing Stephen to issue proceedings to pronounce for the will in solemn form. He alleged; (a) the 2011 will was not validly executed; (b) that his late mother lacked capacity to execute it; and (c) that she did not know and approve its contents.

The Chancery Division dismissed the claim and upheld the 2011 will.

Regarding the execution of the will, although the second witness testified that he had signed without ever seeing Mrs McCabe, his testimony was found to be wholly inadequate to displace the strong presumption of due execution.

There were compelling reasons to doubt Mrs McCabe's capacity. She was in frail health and suffering the effects of Alzheimer's disease. She had repeatedly stated over the years that her estate would pass to both her sons, therefore the 2011 will represented a radical departure.

Stephen made arrangements for the new will and was present in the home when instructions were taken, and when the will was signed. The burden was on Stephen to prove capacity. Applying Key v Key [2010] EWHC 408 (Ch), it is the 'golden rule' that, where a solicitor is instructed to prepare a will for an aged or seriously ill testator, he should arrange for a medical practitioner to first satisfy themselves as to the capacity and understanding of the testator, and to make a contemporaneous record of their examination and findings.

Although Dr A was a specialist, he was unaware of the legal test in Banks v Goodfellow and his contemporaneous record was incomplete. However the court held that failure to comply with the golden rule does not automatically invalidate the will. The court accepted the views of the solicitor and Dr A, that Mrs McCabe had capacity and dismissed the argument that her reasons for disinheriting Timothy were confabulations.

The key reason was her belief that Timothy had initiated the investigation which implicated Stephen, a belief that was neither irrational nor deluded. Lastly, the court was satisfied that Mrs McCabe understood the contents of the will and its effect.

In a final observation, the court stressed that it is a fundamental principle of English law that people should, in general, be free to leave their property as they choose. While relatives may be left confused and disappointed, judges should be slow to accept arguments like those put forward in this case.

See McCabe v McCabe [2015] EWHC 1591 (Ch)

 

Vaughan v Vaughan

In a case highlighting the crucial importance of keeping precedents up to date, the High Court has rectified a defective deed of variation because it failed to achieve the parties’ intentions.

Under the terms of the deceased’s will, the estate passed to his widow and three sons in equal shares. To benefit from the spouse exemption from inheritance tax, the family agreed to make a post-death variation leaving the entire estate to the widow.

The deed of variation was made in October 2009, clearly under some time pressure as it was signed only five days before the two year anniversary of the deceased’s death (the deadline for claiming retrospective inheritance tax treatment).

The precedent used by the solicitor was out-of-date, failing to reflect the changes brought about by the Finance Act 2002, which makes it a condition that a deed of variation must include a statement claiming retrospective tax treatment (section 142(2) Inheritance Tax Act 1984 (IHTA 1984). The High Court held that the deed could be rectified to insert the missing statement.

The court, citing Hodge on Rectification, held that the first requirement for rectification is evidence, not only of a general intention to achieve a fiscal objective, but of specific intention as to how the objective is to be achieved.

Here there was no evidence of intention to include the statement (unlike in other cases of this type, where, for example, the relevant clause had accidentally been deleted from a standard precedent). Indeed, there was no evidence that the solicitor even knew of the need to include the statement.

However, the court held that this did not matter; it was enough that there was clear intention to effect a disposition that would, as a matter of law, enjoy the special retrospective tax treatment. This was evidenced in the solicitor’s attendance note which showed that the whole objective of the exercise was to reduce IHT exposure, with several references to the two year deadline.

The second requirement for rectification is that there must be an issue between the parties which needs to be resolved. Here, the relevant issue was the potential for substantial repayment of IHT (or release from liability if already paid).

In contrast, the court refused to rectify the deed to include a corresponding statement for capital gains tax purposes (as required by section 62(7) TCGA 1992), as there was no evidence at all of the relevant intention. The solicitor’s attendance note was silent on the issue.

On a separate note, HMRC (who did not ask to be joined in the application) pointed out that, even if rectification was allowed, retrospective tax treatment may still be refused as there was evidence that the deed was entered into in consideration for money, or money’s worth (such that section 142(3) IHTA 1984 would apply to deny that treatment).

The High Court left this matter to be decided by the First Tier Tax Tribunal.

See Vaughan-Jones & Anor v Vaughan-Jones & Ors [2015] EWHC 1086 

 

David Ross v A

This is an interesting case that concerned a professional deputy’s application for an order authorising him to apply £17,000 per year from A’s damages award, towards the payment of her brother’s school fees.

A had suffered respiratory problems when she was a few weeks old, as a result of which she suffered brain injury. Her GP was successfully sued as to liability for clinical negligence, and her parents accepted a lump sum award of £5m on her behalf.

At the time of this application, A was 18 years old and lived with her parents, her sister, 21, and her brother, 14. A professional deputy was appointed by the Court to manage A’s property and affairs.

Due to the time and attention which A’s parents gave to her needs, the physical and emotional needs of her brother, B, took a backseat and as a result, his performance at school tended to suffer.

The local authority decided to send B to a school which was some distance away from the family home, and his parents felt obliged to find an independent school that was more local and would enable them to continue to care for A as they had been doing. The deputy made an application to the court for approval to pay B’s school fees from A’s funds, but the application became lost in the system for two years. In the meantime, the deputy continued to pay the school fees.

When the hearing eventually took place, the judge held that it was in A’s best interests for the court to allow the application. The payment of the fees was reasonably affordable for A. If A were not mentally incapacitated, she would acknowledge that her interests were inseparable from those of the rest of the family.

Furthermore if the court was to discontinue the payment of the fees,
A’s parents would be compelled to
return to the job market and employ an external care team to look after A, which would double the family’s outgoings.
The judge also commented that the Official Solicitor’s prudent approach towards the protection of A’s award was unnecessarily cautious and risk-averse.

As regards the best interest test in
the Mental Capacity Act section 4,
it was clear that it was not possible to permit and encourage A to participate in the decision-making process, that A would have no past wishes and feelings on the matter, and that the beliefs and values would be likely to influence her decision if she had capacity were largely speculative.

The court was aware that the parents supported the application but, as the Official Solicitor had suggested, there could have been a conflict between A’s interests and the parents’ interests.

The judge was of the view that the only factor of the statutory test that was of real assistance, was the requirement to take into account the views of the deputy.

The judge was satisfied that A’s deputy knew the family and their circumstances better than anyone else, and stated that the court should be very slow to conclude that whatever decision the deputy had made regarding the school fees was wrong.

The judge was careful to emphasise that this case did not set a precedent for other applications to pay siblings’ school fees, and that each such decision would depend upon the circumstances of each individual case.

Nevertheless the case makes for interesting reading, particularly the discussion by the judge of the mutual dependence in damages cases, between the recipient of the award and their family.

See David Ross v A [2015] EWCOP 46

 

GN v Julia Newland

GN v Julia Newland involved an application for reconsideration of an order made by an authorised officer of the court, appointing a professional deputy for GN.

CN, who had come to England from Jamaica during the 1960s, had four children, namely DN, VN, DS and GN. She lived in a council house which she had purchased under the right to buy scheme, which meant she was entitled to a 45 per cent discount. She paid a deposit and GN had raised a mortgage
to make up the balance.

Following CN being diagnosed with dementia, an authorised officer of the court made an order appointing a solicitor as CN’s deputy. GN requested that the court reconsider the order on the basis that; (a) he had not been given notice of the proceedings; and (b) the court officer had exceeded his authority, made an error of law, was biased against him, and had breached the rules of natural justice.

A general visitor saw CN and reported to the court that, due to CN’s poor short term memory, it was difficult to establish CN’s past wishes regarding her children assisting her. However at the time of the visit, she did not want them to assist. CN told the visitor that DN was in Jamaica so couldn’t be her deputy, VN was in hospital following a stroke and could not do anything for himself, she had not seen DS for 20 years, and she did not want GN to come anywhere near her money or her house. She said that GN was trying to sell her house as his own.

The solicitor stated in a witness statement that DN had been notified of the application and had not raised any objections. She had not notified GN because CN had specifically asked her not to, and also because she was aware
of independent allegations that GN
had physically assaulted his mother,
and therefore she believed it inappropriate that he be notified.

At the hearing, GN was adamant that he was the sole beneficial owner of the house, and refused to accept that his mother had a beneficial interest in the property by virtue of the deposit she had paid, and the discount to which she was entitled.

Senior Judge Lush referred to practice direction 9B, which stated that members of P’s close family were likely to have an interest in being notified that an application had been made to court concerning P.

However the presumption could be displaced where the applicant was aware of circumstances which reasonably indicate that P’s family should not be notified, but that others should be notified instead. The practice direction also stated that, where one child was notified, then all of P’s children should be notified.

SJ Lush held that the solicitor had acted in accordance with the practice direction and that she had had good reason not to give notice to VN (who lacked capacity), DS (with whom she had not had contact for 20 years) and GN (who she did not want anywhere near her house or her money). The presumption that these family members should be notified had been displaced.

Further, GN’s allegations concerning the court officer were entirely unfounded and unwarranted.

The judge dismissed GN’s own application to be appointed as his mother’s deputy, on the basis that he would be unable to act fairly and competently on her behalf, and confirmed that Julia Newland’s appointment as CN’s deputy was in her best interests.

See GN v Julia Newland [2015] EWCOP 43

 

Karen Bayley is a solicitor at Barlow Robbins

Jennifer Ridgway is an associate in the private client team at Michelmores

Jennifer and Karen write regular case updates for Private Client Adviser