SFE case updates

This month we consider three decisions, each of which says something important about an issue with which members may well be faced in the course of their work. The first decision concerns Will rectification and provides a salutary lesson to draftsman as to the need to keep accurate and reliable contemporaneous records of instructions and be honest (and consistent) with their recollections after the event. The second decision is the latest to consider the impact of the Mental Capacity Act 2005 on the common law test for testamentary capacity, but also gives some helpful guidance on what amounts to a ‘delusion’. The third decision is an example of the Court’s approach to costs on trustee removal where the parties have agreed the trustee should go but are not agreed as to the mechanism to achieve that.

Will rectification

Re Nodes decd [2021] EWHC 1057 (Ch)

The Deceased owned 90.91% of the issued shares in a company, his co-driector Mr Eade owned 6.23%, and his wife Mrs Nodes owned 2.86%.

By his 2007 Will, the Deceased gifted to Mr Eade and Mrs Nodes such number of shares as would result in them each owning 26% of the total issued shares. In 2015, the Deceased made a new Will by which his trustees had power to appoint to both Mr Eade and Mrs Nodes such numbers of shares as would result in the total shareholding of the two of them being 26% in total.

Mr Eade brought a claim for construction or rectification on the basis that the Deceased’s true intention was that Mr Eade and Mrs Nodes could end up holding 26% of the shares each (as under the 2007 Will). Mrs Nodes was a defendant to that claim but supported it. It was opposed by the residuary beneficiaries.

The judgment is notable – and salutary – for the approach taken to the evidence, especially the contrast between that of Mrs Nodes, who was present when instructions were given for the 2015 Will and when it was executed, and that of the Will draftsman.

The Will draftsman is strongly criticised for the manner in which his evidence as to the Deceased’s intention came out, specifically, first, that it was not until his first witness statement in the claim, a whole year after the uncertainty as to the term of the Will in issue first had been raised that he set out his recollection, and, second, when he then did so, that evidence was “direct, clear, and specific” as to the important and fundamental instructions allegedly given by the Deceased notwithstanding the passage of time and the absence of any contemporaneous record in support.

The Will draftsman was further criticised, and his evidence was seriously undermined, by the fact other aspects of his evidence lacked the same directness, clarity, and specificity and by the fact, notably, that under cross-examination he admitted the crucial word in his manuscript attendance note was “each” not “both” (despite not addressing this key question in his oral evidence, even after a single joint document expert concluded the word was “each”), before requesting a short break after which he offered excuses for his ‘mistake’ and ‘corrected’ himself to “both”. In short, it was clear that the Wills draftsman – possibly conscious of the underlying risk of liability in the event the Will was found not to be accurately drafted – advocated his own position, rather than sought to assist the Court.

In contrast, Mrs Nodes was praised for her own meticulous record-keeping and attention to detail, and her honesty in oral evidence as to the extent and quality of her recollections.

The lessons for practitioners are clear: keep full and legible contemporaneous records, in case of dispute set out your position on the evidence early and consistently, and when giving evidence in proceedings focus on your overriding duty to the court above all other personal considerations.

Testamentary capacity

Re Clitheroe [2021] EWHC 1102 (Ch)

Whether the Banks v Goodfellow common law test for testamentary capacity in a contentious probate claim brought after death has been replaced by the statutory test under ss.1-3 of the Mental Capacity Act 2005 applied in the Court of Protection has been considered (and rejected) in at least Scammell v Farmer [2008] WTLR 1261, Re Walker decd [2015] WTLR 493, and James v James [2017] WTLR 1313.

The Chancery Division has taken the view that the scope of the Mental Capacity Act 2005 is limited to the Court of Protection’s jurisdiction over living persons and does not extend to contentious probate in the High Court: had Parliament intended to replace or amend Banks v Goodfellow, it would have done so in express terms.

The point was not raised in Re Clitheroe at first instance ([2020] EWHC 1185 (Ch) – before Deputy Master Linwood), where it was held that the deceased lacked testamentary capacity to make two Wills excluding the defendant by reason of an affective disorder including a grief reaction that gave rise to insane delusions about the defendant and her conduct.

The claimant/appellant attempted to raise the point on appeal to Falk J, but was not permitted to do so: to raise the point on appeal was contrary to the overriding objective in circumstances where the parties had agreed that Banks v Goodfellow was the correct test and aspects of the trial would have been conducted differently otherwise.

That decision notwithstanding, Falk J determined the question, approving James v James and Re Walker and largely adopting the reasoning therein, namely that it is apparent from the terms of the Mental Capacity Act 2005 that it is concerned only with decision-making of and on behalf of living persons (and the past capacity of living persons to do limited, defined acts, such as make Lasting Powers of Attorney).

Perhaps more interestingly, the Court gave careful consideration to the question of insane delusions, a limb of the Banks v Goodfellow test that has attracted increasing attention in recent years.

On appeal, the issue was whether, as a matter of existing authority, in order for a belief of a testator to amount to an insane delusion, it is necessary for it to be impossible to reason the testator out of that belief. Falk J held that while an insane delusion will often satisfy that test, it is not a necessary requirement that it do so: the proper test is whether the belief is irrational, fixed, and out of keeping with the testator’s background. While compliance with that test will often be demonstrated by proof the testator could not be reasoned out of their belief, it may also be demonstrated by the testator formed and/or maintained the belief in the face of clear evidence to the contrary (so that there is no sensible basis to conclude the testator was merely mistaken or had forgotten the true position), or without any evidence at all on which to base it.

Accordingly, so explained, the test may be considered to be ‘lower’ than previously thought, such that more delusions claims may be forthcoming in future. The practical concern for the Will draftsman may be that they should ask a testator to explain the basis for any particularly operative belief they express when giving instructions for the dispositions they wish to make, in order to flag up possible delusions and/or minimise the scope for future dispute as to the nature of this belief..

Trustee removal

Moore v Houlihan [2021] 5 WLUK 336

This decision comes out of the breakdown in relations between an applicant solicitor and respondent law firm at which she had been employed: the solicitor had been appointed trustee of several discretionary trusts, but then her employment ceased, leading to ongoing employment proceedings.

A dispute arose concerning the administration of the trusts, and the law firm sought to remove the solicitor as trustee under Section 36 of the Trustee Act 1925 on the grounds she was unfit to act. The solicitor objected to this as a proper ground for her removal on the facts, which led the law firm to intimate it would apply to Court for her removal if she did not concede that she had been effectively removed. The solicitor would not give that concession, and so the law firm made its application, which was dealt with on the papers; the solicitor was ordered to pay costs on the basis of the inter partes correspondence before the Court, which led the Court to conclude the solicitor had not sought to reach a compromise.

The solicitor applied to have the costs order set aside, adducing earlier inter partes correspondence by which the solicitor agreed to retire as trustee if the attempt to remove her was withdrawn. In light of this new evidence, the Court set aside the costs order to the effect there was no order as to costs. The Court expressed surprise that litigation had resulted at all given the law firm wanted the solicitor’s trusteeship to cease and the solicitor was prepared to resign, the dispute being limited to the process by which that was to be achieved. The Court could not determine who was more at fault: the law firm for insisting the solicitor had been properly removed, or the solicitor for insisting that the removal be withdrawn so that she could instead resign. In effect, the Court took the approach of ‘a plague on both their houses’.

This should stand as a reminder to practitioners to keep a firm eye on the bigger picture in any dispute: had either side been prepared to swallow their pride as to means, the end they both desired would have been achieved without any costs of litigation. It is also a reminder that an early concession in any dispute may well prove to have significant costs consequences a long way down the line, even if it does dispose of the whole dispute and/or mirror the relief ultimately granted.