Making amends
Date: 12 November 2010
Authors: Paul Hewitt, Paola Fudakowska & Adam Cloherty
Issue: Vol 160, Issue 7441
Categories: Features, Wills & probate
In Perrins v Holland [2010] EWCA Civ 840, the Court of Appeal reinforced and approved the well-known rule in Parker v Felgate (1883) LR 8 PD 171.
In April 2000, when he had testamentary capacity, R gave instructions for a will revoking a former will in D’s favour and leaving his entire estate to A. However, in September 2001, when he finally executed the will, R no longer had full capacity—although it was read and summarised to him, he approved it, and it continued to represent his testamentary intentions. At first instance, applying Parker v Felgate, Lewison J held that the will was therefore valid.
D appealed to the Court of Appeal, submitting that (i) the decision in Parker v Felgate was wrong; (ii) by definition R could not have known and approved of the will when executing it if he lacked full capacity at that time; and (iii) in applying the Parker v Felgate, Lewison J had failed to consider whether R’s instructions were “settled” in the sense required, which they were not.
D failed on all three bases.
The Court held that, far from coming “out of the blue” as D submitted, the rule in Parker v Felgate had a venerable history dating back to mid-18th century decisions of the Ecclesiastical court, from which it was clear that “whilst what might be called full testamentary capacity is required at some time that time does not have to be the moment of execution of the will” (Morrit C at [14]).
Moreover, it was approved as good law by the Privy Council in Perera v Perera [1901] AC 354 and had been applied in numerous cases since—including in relation to the requirement for knowledge and approval.
D’s second submission, that logic dictated that the requirement for full capacity was in turn needed to meet the requirement of knowledge and approval, was based in part on Chadwick LJ’s observation in Hoff v Atherton [2005] WTLR 99 that the two requirements are “conceptually distinct” and that “a testator cannot be said to know and approve the contents of his will unless he is able to, and does, understand what he is doing and its effect”.
In fact, analysis of the authorities (including two Privy Council decisions) shows that the requirement or knowledge and approval is simply “a shorthand reference to the need for evidence to rebut suspicious circumstances” ([25]). In a case like Perrins, all that need be shown is that the testator accepted the contents of the will at the time of execution, which does not require “full” testamentary capacity at that time. In other words, the knowledge and approval requirement does not indirectly import a requirement of full capacity so as to drive a coach and horse through the rule in Parker v Felgate.
Finally, D’s third submission was found to be inconsistent with the judge’s express finding that R’s instructions were given and carried through into the will and that they continued to represent his intentions at the time of execution.
Mutual wills
In Charles v Fraser [2010] EWHC 2154 (Ch) two elderly sisters, M and E, made mutual wills in 1991. They agreed to leave their assets to one another on the basis that after the death of the survivor her estate would be divided into forty shares. Half of the shares were allotted to people chosen by M and half to people chosen by E. M’s estate was administered in accordance with the agreed distribution. E subsequently revoked her 1991 will and executed a new will in substantially different terms, removing some of the beneficiaries she had chosen and adding additional ones. Subsequently, E instructed a solicitor to draft a further will. E executed a new will leaving her entire estate to her neighbour who was also appointed executor. The putative beneficiaries under the 1991 will sought to claim that E’s estate was held on the trusts of that will.
Jonathan Gaunt QC, sitting as a High Court judge, observed that the starting point must be that it is unlikely a testator is prepared to give up the possibility of changing their will. However, he held that there were mutual wills and placed considerable weight on the fact that the division of shares was detailed and clearly thought through by the sisters in 1991. He ordered that E’s estate was held on the trusts of the 1991 will.
Rectification
In Ashcroft v Barnsdale [2010] EWHC 1948 (Ch) D died in 2006 having executed a will in 1980. Under the terms of the will, D’s husband (H) was to receive £10,000 and the farmland while the residue passed to their three children.
The will was inefficient for inheritance tax purposes as the farmland and farming business attracted 100% agricultural property relief but this relief was not utilised as the farmland passed to H and therefore subject to the surviving spouse exemption. The family decided to draw up a deed of variation by which H exchanged the farmland for a monetary equivalent. However, the deed of variation was defective in several respects and increased the inheritance tax due. On realising this, the parties sought to rectify the deed of variation. HMRC refused to accept the rectification deed unless approved by the court. Therefore, H filed a Part 8 claim seeking to rectify the deed of variation.
Judge Hodge QC upheld the claim for rectification on the grounds that C had demonstrated a “specific common intention as to how the parties’ fiscal objectives were to be achieved” and that it was only due to a mistake in the expression of this intention in the deed of variation that effect had not been given to that intention. Judge Hodge QC found that there was cogent evidence to support this otherwise rectification would not have been ordered if the only effect of the order would have been to secure a fiscal benefit for one or more of the parties. The true intention of the parties in this case was not to alter the incidental burden of inheritance tax but to reduce the amount of tax payable to HMRC.
Paul Hewitt & Paola Fudakowska of Withers LLP & Adam Cloherty of XXIV Old Buildings
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