Analysis
Joyce Smith (Mrs Smith) lived at 49 Home Close, Wolvercote, Oxford (property). She had two daughters, the late Norma Kicks who died in January 2004, and the defendant. After her daughter’s death, Mrs Smith changed her will (will) in February 2008 and gave her entire net estate to the defendant, whom she had appointed sole executrix and trustee, to hold as to 50% for the defendant and 50% equally between Mrs Smith’s four grandchildren. The claimants were the two children of the late Norma Kicks. Mrs Smith’s health began to decline from November 2008. The defendant and her husband, who lived in Maidstone in Kent, came to visit her at Christmas 2009. Although Mrs Smith wished to remain in her own home, the defendant and her husband took her back with them and moved her into a care home, the Maidstone Care Centre. At the same time, the defendant’s husband changed the locks on the property and, shortly afterwards, placed it on the market for sale. The defendant arranged for Withy King to be instructed as conveyancing solicitors on 22 January 2010. Her husband was instrumental in arranging for Mrs Smith to sign all necessary documentation and, following a telephone call to Mrs Smith, contracts were exchanged for the sale of the property on 9 April 2010. The telephone attendance note recorded that Mrs Smith confirmed that the net proceeds of sale were to be transferred into an HSBC bank account in the joint names of the defendant and her husband. A total of £292,899.92 was transferred when the sale of the property was completed on 23 April 2010. Thereafter efforts were made by the defendant and her husband to prevent other members of the family from visiting Mrs Smith. They were not informed when Mrs Smith died on 7 December 2011 and was cremated on 23 December 2011. Subsequently, the defendant asserted that the transfer of the net sale proceeds of the property was a gift by her mother. However, she took no steps towards applying for a grant of probate and did not respond to a detailed letter of claim from solicitors acting for the claimants. In response to enquiries, Withy King confirmed that they had not advised Mrs Smith in relation to any gift of the net proceeds of sale of the property. The defendant did not take independent legal advice and, after proceedings were issued on 25 April 2013, refused to accept service or comply with the procedural rules. The claimants sought to set aside the transfer by Mrs Smith to the defendant and her husband of the net sale proceeds of the property on the grounds that Mrs Smith lacked the mental capacity to make such a gift; alternatively, the transfer was procured by the defendant’s exercise of undue influence over Mrs Smith. Notwithstanding a debarring order, at the trial the defendant appeared in person, assisted by her husband.
Held (setting aside the transfer on the ground of undue influence):
As regards the question whether Mrs Smith had the mental capacity to make a gift of the net sale proceeds of the property, the correct approach was to apply the common law principles in Re Beaney rather than the statutory principles set out in the Mental Capacity Act 2005. The statutory test was to be applied ‘for the purposes of the Act‘ in relation to matters specifically arising under the Act. Moreover, whilst taking account of the Code of Practice, it was not clear that the statutory test merely encapsulated the common law principles, and the conclusion reached in this case was consistent with the recent judgment in Walker v Badmin. As for the approach to the burden of proof, the authorities supported the proposition that whilst the legal burden was on the party asserting incapacity, if that party adduced evidence to raise a sufficient doubt from which incapacity could be inferred, then the evidential burden would shift to the opposing party. However, on the evidence in this case, the claimants had not discharged the legal burden of proof that Mrs Smith was not capable of understanding the nature and effect of the gift, had its general purport been fully explained to her.
As regards the principles to be applied in considering whether the gift of the net sale proceeds of the property should be set aside on the ground of undue influence, these were well established. Firstly, there had to be a relationship of trust and confidence, or ascendancy, between Mrs Smith and the defendant. Secondly, there had to be a transaction which called for an explanation. Thirdly, had any resulting presumption of undue influence been rebutted? On the facts, as found, whilst there was a loving relationship between Mrs Smith and her daughter, it was nevertheless one of trust and confidence, in which the defendant was in the ascendancy over her mother, driven by her own husband’s ascendancy over her. As the net sale proceeds of the property represented Mrs Smith’s principal asset and there was no evidence that she had any other assets of substantial value, the effect of making a gift of that asset to the defendant was effectively to deprive the beneficiaries under the will of all or a substantial part of their inheritance and, therefore, the transaction called for an explanation. In those circumstances, a presumption of undue influence arose and there was no evidence with which to rebut that presumption. Accordingly, the transfer of the net sale proceeds of the property would be set aside on the ground of undue influence and the defendant ordered to pay the sum of £292,899.92 into Mrs Smith’s estate together with interest from 23 April 2010.
JUDGMENT MR STEPHEN MORRIS QC (A) Introduction [1] This action, commenced on 25 April 2013, concerns the estate of the late Joyce Smith (Mrs Smith) who died, aged 85, on 7 December 2011. The claimants are Mr Paul Kicks and Mrs Lisa Martin, two of Mrs Smith’s grandchildren. They are the children of one of …Continue reading "Kicks v Leigh [2014] EWHC 3926 (Ch)"