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posted 14 Jun 2004 in Volume 9 Issue 4
Case digest
Void gift: Undue influence
Bernard Pesticcio v (1) Alan William Huet (2) Abbey National (3) Maureen Niersmans (4) Leonard Niersmans [2004] EWCA Civ 372
The Independent, 7 April 2004
Bernard Pesticcio, aged 70, was mentally and physically impaired as a result of a childhood illness. He had lived in the family house all his life, with his parents. In August 1981, his widowed mother gave Bernard the house and it was his most valuable asset.
Bernard was admitted to hospital following a serious fall in May 1997. After six months, he was eventually discharged to a nursing home, where he continues to live. Bernard’s mother went to live with Maureen, her daughter and Bernard’s sister, but, in due course, they moved into Bernard’s house. In April 1999, his mother moved to a nursing home until her death in March 2003.
While in hospital, Bernard was visited by a solicitor having been initially contacted by Maureen or her daughter Caroline. There had been several meetings with Bernard, including one at the house. On 3 October 1997, the solicitor took instructions from Bernard for a will and EPA. On 15 October, the solicitor visited Bernard to sign both documents.
On 8 January 1998, the solicitor saw Bernard and Maureen and advised that if his mother left the house and Bernard remained as the owner it would be taken into account in the local authority means test. A deed of gift in Maureen’s favour was signed on 3 February 1998. Maureen then sold the house to her daughter’s boy friend.
Bernard’s brother, Ronald, then applied to the Court of Protection to become his receiver and was authorised to be his litigation friend to bring proceedings against Maureen to set aside the gift.
The judge did not regard the explanation of the gift as satisfactory. As Bernard’s mother was living at the house at the time of the assessment, it would not have been taken into account and the local authority could attack the gift under the notional-capital rule. Further, the deed did not make provisions for his mother’s care.
In addition, the judge at first instance found that the solicitor’s legal advice to Bernard was lacking as she had communicated with Maureen and Caroline and not Bernard; made no contemporaneous attendance notes when meeting Bernard; had not made clear to Bernard all his options and the disadvantages of making the gift or imposing any legal obligation on Maureen. Equally, she did not explain that Bernard did not need to follow the wishes of Maureen, nor did she consider the possibility of undue influence. He had, therefore, been deprived of independent legal advice. On that basis, the judge declared that the deed of gift was procured under undue influence by Maureen and was void against her. Maureen appealed against the decision.
HELD:
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The decision of the judge could not be faulted. The presumption of undue influence could be rebutted by showing that the transaction had been entered into after the nature and effect of the transaction had been fully explained to the donor by an independent qualified person (Inche Noriah v Omar [1929] AC 127 followed);
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The court had to be satisfied that the advice given by the independent qualified person was relevant and effective. It had to free the donor from the impairment of the influence on his free will and give the donor the necessary independence of judgement to make choices with a full appreciation of what he was doing;
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The advice given by the solicitor was inadequate and wanting in several respects. Her advice could not be equated to that which a competent adviser would have given if acting solely for Bernard.
Appeal dismissed.
Re F: Hostility and attorney’s unsuitability considered
The Times Law Reports, 29 April 2004
Mrs F, a widow, was born in 1917. She had two children: Mr A, a retired solicitor who lived close to his mother; and Mrs B, who lived in Ireland. Mrs F made an enduring power of attorney in July 2000 appointing Mr A as her sole attorney. The relationship between the siblings was hostile.
Mrs F had told her friends and family that she wished to remain in her own home for the rest of her life. But by 2002 she had become unable to cope so she moved into a nursing home. When Mr A sought to register the power, Mrs B objected on the grounds that her brother was unsuitable to be the attorney due to their hostile relationship. Mrs B’s complaint included the distress caused to her mother by Mr A’s wish to sell her home, his failure to secure and maintain the empty property and provide information to Mrs B about his mother’s affairs.
Dr X, the Lord Chancellor’s medical visitor reported that Mrs F was suffering from arteriosclerotic dementia, which has led to some memory loss but she was able to hold rational conversations. She was disoriented in relation to dates and other historic details. During the interview with Dr X, Mrs F expressed concern that her son and daughter were having disagreements. She would prefer them “to live together and agree”. She also wanted Mr A to discuss things with his sister. She then went on to say that if they could not agree, it would be better for an independent receiver to be appointed. Mr A argued that his mother’s expressed views were unreliable as an accurate account of her true wishes and feelings.
The master upheld the objection on the ground that Mr A was unsuitable by accepting at face value Mrs F’s statement to Dr X that she would prefer an independent receiver to be appointed if her son and daughter could not agree. The likely continuation of bad relations between them due to the attorneyship was, in the master’s judgement, the cause of her concern. She did not suggest that she regarded her son as unsuitable to be her attorney for any other reason, nor was there any evidence that he would fail to carry out his duties as attorney otherwise than in accordance with the law and in the best interests of his mother. Mr B appealed.
In order to refuse registration of the power under s.6 (5)(e) of the 1985 Act, the court has to be satisfied, not of the chosen attorney’s suitability, but rather that he is unsuitable to be the attorney: see Re E (Enduring Power of Attorney) [2001] Ch 364 at page 376H.
The power is fiduciary in nature and has to be exercised in good faith for the benefit and in the interests of the donor. If there is any reason, following registration, to suppose that the attorney has or is likely to act otherwise than in accordance with this duty, the court has power to give directions under s.8 (2) and may, in appropriate cases, cancel the registration under s.8 (4) and appoint an independent receiver. There was no evidence before the court to suggest this would be necessary in this case.
It was unlikely that the appointment of an independent receiver would heal the rift and would merely add to expense. Mrs F had lived with the hostilities for some time and it did not lead to any apparent deterioration in her relationship with either of her children individually or in the trust she had in her son to manage her affairs. There was no evidence that Mr A had or would abuse that trust in the future.
The court did not read Dr X’s report as indicating a preference by Mrs F for an independent receiver in any event, but rather as a reluctant acceptance of such, if no other way could be found of resolving her children’s differences. To remove a chosen attorney because of hostility from a sibling or other relative, in the absence of any effective challenge to his competence or integrity, should require clear evidence either that the continuing hostility will impede the proper administration of the estate or will cause significant distress to the donor that would be avoided by the appointment of a receiver. The evidence satisfied neither of these conditions in this case.
Above cases compiled by Caroline Bielanska, a solicitor, TEP, lecturer and freelance consultant. She can be contacted at: caroline.bielanska@ntlworld.com.
Scottish power of attorney: Power to gift
McDowall & Others (McDowalls Executors) v IRC (and related appeal) unreported (SPC382) 22 and 23 April 2003
This Scottish case determined that an attorney did not have the authority to make gifts on behalf of a principal in the absence of a clear power to do so upon construction of the power of attorney. Gifts purported to be made under such a power were, therefore, ultra vires and, on the death of the principal, his executors were entitled to recover the gifts and the amounts transferred, which, therefore, formed part of the deceased’s estate.
The case is interesting because it turns upon the construction of a Scottish power of attorney rather than an English EPA. There are, however, parallels with the powers of an attorney under an EPA and this is the first case that confirms that gifts purported to be made in excess of the attorney’s authority under a power were void because they were ultra vires rather than voidable.
This case will be discussed in more detail in a later edition of ECA.
Lynn Humblestone v Martin Tolhurst Partnership (a firm) [2004] EWHC151 (Ch) unreported
The case is a reminder that, in principle, a solicitor can owe a duty to both the testator and the beneficiaries to ensure and check that the proper formalities for the execution of a will have been complied with.
The testator died in 1995. Some 18 months before his death, a will had been drafted for him by a partner at the defendant’s firm of solicitors. After his death, when the will was examined, it was found that although it bore a date and was signed by two purported witnesses, it had not been signed by the deceased. Consequently, the deceased died intestate and his estate passed to his parents. The claimant would have been entitled under the unsigned will if it had been validly executed. The claimant claimed that she had asked a secretary at the defendant’s firm of solicitors to check that the will had been properly executed before it was deposited.
The case concentrated on alleged negligence, reviewing the line of cases from Ross v Caunters (1980) through to White v Jones (1995). The judge concluded that a duty to testator and beneficiaries to check formalities could arise. In this case, the duty owed to the testator, with a consequential duty to the beneficiaries, was broken as the solicitors were instructed to draft the will and knew that in due course they would be required to keep it in safe custody. Normal fulfilment of such a retainer would require the solicitors, when the document was returned to them for safe-keeping, to check that on its face and on the facts known to them, the execution was valid. In addition, a duty arose in this case because the judge found that the firm had checked the wills when they were returned and found them to be ‘in order’. In so doing, the defendant firm had assumed a duty of care and were in breach of it. It made no difference if, as may have been the case here, the confirmation had been made by a secretary.
Consequently, the defendant firm was in breach of duty to the deceased and by extension, to the deprived beneficiaries. The overall damages were the equivalent of the amount that the beneficiary would have taken under the will had it been validly executed.
Domicile: Inheritance tax
Leon Rhys Morgan as attorney of Sir Peter Shaffer v Diane Cilento & Others [2004] EWHC188 (Ch)
Sir Peter Shaffer, who had a domicile of origin in England and Wales died in London on 6 November 2001. Of the five defendants in the case, four contended that he died domiciled in Queensland, Australia, whereas the fifth defendant, who was in a relationship with him during the last years of his life, contended that he had died domiciled in England and Wales. If the latter had been proven, the estate would be liable to pay inheritance tax and would be vulnerable to claims under the Inheritance (Provision for Family and Dependants) Act 1975.
The case was complex, involving marriage, divorce and other relationships, as well as frequent travel between England and Australia. It was held that the deceased had obtained a domicile of choice in Queensland. Interestingly, in delivering his judgement, Mr Justice Lewison listed some 18 factors that he had taken into account in reaching his decision and the case is a very useful exposition of the type of facts courts will take into account when considering domicile.
Above cases compiled by Julia Abrey, principal at Withers LLP. She can be contacted at: julia.abrey@withersworldwide.com.
