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15 February 2015 | Comment | Article by Roman Kubiak TEP

Capacity and undue influence in relation to lifetime gifts: Kicks v Leigh

Mattlooks at the recent decision in Kicks & Anor v Leigh [2014] EWHC 3926 (Ch) in which the High Court held that Mrs Joyce Smith had been subject to undue influence when she made a lifetime gift to her niece, Mrs Georgina Leigh, of the proceeds of sale of her home.

In the recent case of Kicks & Anor v Leigh [2014] EWHC 3926 (Ch), the High Court has explored the law of capacity in the context of a lifetime gift.

The claim concerned a lifetime gift made by the deceased, Mrs Joyce Smith. The claim was brought by two of Mrs Smith’s grandchildren against their aunt, Mrs Smith’s surviving daughter, Mrs Georgina Leigh. The factual background demonstrated the judge’s view that:

“feelings between the Claimants and [their wider family], on the one hand, and the Defendant and [her husband], on the other, have been running high for some considerable time and remain so.”

Following Mrs Smith’s move to live with her daughter in Kent, and, shortly thereafter, her move to a care home, Mrs Smith’s property was marketed and sold. The proceeds of the sale (approaching some £300,000) were transferred to the defendant’s bank account by the solicitors dealing with the conveyance. The claimants argued that, at the date of the transfer of the sale proceeds, Mrs Smith did not have capacity to make a lifetime gift, or in the alternative that the gift was procured by undue influence.

In considering the first head of claim, the judge considered what might be the appropriate legal test to ascertain whether Mrs Smith had capacity to make the gift.

The common law test is set out in Re Beaney deceased [1978] 1 WLR 770, which states that the test is “whether the person making it was capable of understanding the effect of the deed when its general purport has been fully explained to him”. This is expanded upon further to say:

“The degree or extent of understanding required in respect of any instrument is relative to the particular transaction which it is to effect… if [the gift’s] effect is to dispose of the donor’s only asset of value and thus, for practical purposes, to pre-empt the devolution of his estate under his will or on his intestacy, then the degree of understanding required is as high as that required for a will, and the donor must understand the claims of all potential donees and the extent of the property to be disposed of.”

This was compared and contrasted with sections 1 to 3 of the Mental Capacity Act 2005, and particularly the steps set out within ss.3(1)-(4) concerning the individual’s ability to understand the information provided, retain it, use or weigh it in order to make a decision and communicate that decision.

In considering the correct test the judge set out his concerns that the Mental Capacity Act 2005 test was not intended to be used other than by the Court of Protection, and that s.3 did not ‘merely encapsulate’ the test, as is referred to within the accompanying Code of Practice. Having considered those points the judge stated that he would rely on the common law test as set out within Re Beaney, and if required to consider the Mental Capacity Act 2005 test at all it would be alongside the common law test, and not in place of it.

Ultimately, the court found that Mrs Smith did have mental capacity but was subject to undue influence. Notwithstanding the decision, the judge’s thorough consideration of both the Mental Capacity Act 2005 and the substantial case law concerned with the relationship between the statutory tests and common law tests of capacity to make a lifetime gift is welcome clarification. Coupled with the corresponding decision of Walker v Badmin [2014] All ER (D) 258 concerning testamentary capacity, the High Court may have removed any lingering doubts regarding the correct approach to issues of mental capacity.

Author bio

Roman Kubiak is a partner and head of the market leading Contested Wills, Trusts and Estates team.

He advises across the whole spectrum of private wealth disputes, with a particular focus on high value, complex and cross-border disputes including: trust disputes, breach of trust claims and applications to remove trustees; will disputes, particularly those with an international element; claims under the Inheritance (Provision for Family and Dependants) Act 1975; and claims for equitable relief under proprietary estoppel, constructive trusts and resulting trusts.

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