Undue influence

Re Davidge [2003] WTLR 959

Davidge is a rather unusual case on undue influence in relation to lifetime gifts.

The deceased left the residue of her estate to be divided between the children of her two sisters.

The defendant was the only daughter of one sister and had always been very close to her aunt.

The claimants were the children of the other sister and had always lived in the US.

The claimants alleged that the residue of the estate had been depleted by two gifts made shortly before the deceased's death.

One was a gift of 35,000 made to the defendant to assist her with financial difficulties; the other was a transfer of more than 170,000 to a trust set up for the education of the defendant's children.

Judge Rich QC found that there had been a close relationship between the defendant and her aunt which allowed her to take advantage of her aunt's vulnerability but which also explained her aunt's generosity.

The gift of 35,000 was explicable and there were no grounds for treating as anything but an expression of the deceased's free will.

The transfer to the trust was different.

The defendant's husband had completely misdescribed the nature of the transaction.

The deceased had had no independent advice and had not entered into the transaction after free and informed thought.

The wrong advice was not the defendant's but it was her relationship that led to the gift.

Her failure to ensure that her relationship was not abused placed her under a conscientious obligation to compensate the residuary estate.

Inheritance tax and farmhouses

Rosser v IRC [2003] WTLR

Rosser is the most recent case on inheritance tax and farmhouses.

The deceased and her husband had been farmers.

In their late eighties they gave 39 of the 41 acres to their daughter, retaining the house and a barn.

The special commissioner found following Starke v IRC [1995] STC689 that the house and barn were not themselves agricultural land; the house was not a farmhouse immediately before the death; the barn was of a character appropriate to the two retained acres of farmland and was eligible for agricultural property relief.

Ademption

Pennington v Waine [2003] WTLR 1011

In this case, former Judge Hegarty QC found that the fact that shares are subject to pre-emption rights does not mean that the exercise of those rights will cause ademption.

The defendants had argued that the court was bound by the long established rule in Lawes v Bennett to find that the proceeds of sale of the shares would be payable to the residuary beneficiaries and not to the specific legatees.

However, the court felt able to distinguish the present case.

In Lawes (and subsequent cases following it) testators had themselves granted options to purchase or conditional contracts, the exercise of which had led to conversion.

In effect they had given the grantees of the option the right to control the destiny of the property.

Pre-emption rights are different.

They are triggered only when, and if, the property owner decides to sell.

The court held that the shares would devolve under the will in their unconverted form and be unaffected by subsequent events.

Re Viertel [2003] WTLR 1075

This Australian case, decided in 1996, is reported by the Wills and Trusts Law Reports for the first time.

It is relevant as it reviews the main English authorities on ademption.

The testatrix's attorneys acting under an enduring power of attorney sold the testatrix's house when she went into a residential home.

The house had been specifically devised in the testatrix's will, but the attorneys did not know this.

The court relied on the old case of Jenkins v Jones (1866) LR2 Eq323 which states that 'when a testator's asset is altered by a third party, the question whether the testator, or knowledge of the facts is a relevant factor on the question of ademption.' In the absence of such knowledge the testator has no opportunity to amend the will.

The devisees were, therefore, entitled to the proceeds of sale of the house.

The English courts made a similar decision in Re Dorman [1994] 1WLR 282 (also a case involving action by attorneys) although there the basis of the decision was that the new asset (a high earning deposit bank account) was 'substantially the same thing' as the original asset (a lower earning deposit account).

Normally a testator must have capacity at the time the will is executed.

However, under the rule in Parker v Felgate (1883) 8 PD 171 a will may be valid even though the testator has lost testamentary capacity by the time the will is executed provided:

- The testator had capacity at the time he gave the solicitor instructions to prepare a will; and

- The will is prepared in accordance with those instructions;

- At the time the will is executed the testator remembers having given instructions for a will and believes that the will has been prepared in accordance with those instructions.

It is immaterial that the testator does not remember precisely what the instructions were or cannot understand the will if it is read out.

Imelda Clancy v Edward Clancy [2003] WTLR 1097 is a recent example of the application of the rule in Parker v Felgate.

The testatrix (Ivy) was terminally ill.

She signed her will in hospital on 28 March 2000, two days before her death.

Her son, Edward was the sole beneficiary.

The will was said to accord with instructions given by Ivy to her solicitor in December 1999.

Ivy's daughter, Imelda, challenged the will on the basis that Ivy lacked testamentary capacity and did not know or approve of the will's contents.

By 28 March 2000 Ivy was terminally ill with cancer, heavily sedated, and deteriorating physically at a rapid rate.

The evidence of both medical experts, members of the family and nursing staff was that Ivy probably did not have the necessary capacity when she executed the will.

However, the will was prepared in accordance with the instructions Ivy gave the solicitor in December 1999.

The requirements of the rule in Parker v Felgate were satisfied and the will was held to be valid.

By Lesley King, College of Law, London