Legacy Bulletin - July 2021

On 4 May 2021, Falk J handed down judgment on the claimant’s appeal against the first instance decision in Clitheroe v Bond [2020] EWHC 1185 (Ch). The key question considered was the first ground of appeal which centred on the correct test in relation to assessing testamentary capacity, and whether the approach set out in Banks v Goodfellow or the Mental Capacity Act 2005 should be applied.

One of the important distinctions between the two approaches is the effect on the burden of proof, which can be key in cases of this nature. Under the Banks v Goodfellow test the burden of proof is as summarised by Briggs J in Key v Key [2010] 1 WLR 2020 at [97]:

“The burden of proof in relation to testamentary capacity is subject to the following rules. (i) While the burden starts with the propounder of a will to establish capacity, where the will is duly executed and appears rational on its face, then the court will presume capacity. (ii) In such a case the evidential burden then shifts to the objector to raise a real doubt about capacity. (iii) If a real doubt is raised, the evidential burden shifts back to the propounder to establish capacity none the less…”

Under the Mental Capacity Act 2005, specifically s.1(2) which imposes a presumption of capacity, the burden of proof lies with the objector to establish a lack of capacity.

Falk J found that it would not be in the interests of justice to permit an appeal on the basis that Banks v Goodfellow had been superseded by the Mental Capacity Act 2005, given that it had been expressly conceded that Banks v Goodfellow was the appropriate test at trial and the trial had been conducted on that basis, and it would be disproportionate for the matter to proceed. However, Falk J nevertheless expressed her view on the legal point, commenting that the Banks v Goodfellow test remains the test for assessing testamentary capacity. There was no sufficiently good reason to depart from well-established case law and the Banks v Goodfellow test has proved flexible enough to take account of developments since its formulation.

In respect of the second and third grounds of appeal, regarding the interpretation and application of the test of delusions, they were adjourned to allow the parties to engage in ADR. However, Falk J expressed her view that to establish a delusion it must be shown that the relevant false belief must be irrational, fixed in nature, and out of keeping with the testator’s/testatrixes’ background – there should be a holistic assessment of all the evidence. 

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If you have any queries in relation to the above or would like further information, please contact Sean Knight at SeanKnight@stoneking.co.uk.

The recent judgment in Hughes v Pritchard (2021) [EWHC 1580 CH] provides an interesting example of a case where a Will was overturned despite the deceased’s solicitor having followed the ‘golden rule’ when preparing it.

The ‘golden rule’ was set out in the case of Kenward v Adams (1975), and states that ‘in the case of an aged testator … the making of a Will by such a testator ought to be witnessed or approved by a medical practitioner who satisfies himself of the capacity and understanding of the testator’.

In the case of Hughes v Pritchard, the golden rule was followed and Mr Hughes’ GP assessed Mr Hughes as having testamentary capacity. At trial the medical expert agreed that Mr Hughes had capacity at the time of making his Will. However, despite this, the Will was set aside on the grounds of capacity as Mr Hughes’ GP had been misled into thinking that the will made only minor changes to a previous Will.

This case therefore demonstrates that following the golden rule does not guarantee the validity of the Will and that any capacity assessment needs to be carried out on the full facts.

The judgment can be read in full here.

If you have any queries in relation to the above or would like further information, please contact Kerry Rogers at KerryRogers@stoneking.co.uk.

On 26 May, the Charities Bill was introduced to Parliament and is now going through the various stages required in advance of changes to the law relating to charities.  Some of these changes will have an impact on land held by or in trust for charities, in particular the steps that charities need to go through when disposing.  The changes are being made in an attempt to both require and enable trustees to deal with charity property in a way which is proportionate and appropriate and this is welcome news. 

Some of the proposed changes, which will likely have an impact on the process of dealing with legacy property, relate to designated advisers and the advice requirement.  Highlights include:

Charity trustees need to obtain advice when charities sell property.  Currently, charities can only obtain advice from a member of the Royal Institution of Chartered Surveyors.  The proposal extends the permitted advisers to include estate agents and agricultural valuers and also suggests that confirmation is given that, if they are suitably qualified, charity trustees, employees and officers of the charity may provide advice under sections 119(1)(a), 120(2)(a) and 124(2). The intention seems to be that a new list of what the advice needs to cover will be brought in and that the advisor will be required to provide a self-certification that they are appropriately qualified and do not have any conflicts with the charity.  Further, the plan is that there should be no statutory requirement to advertise a disposition.  Additionally, it is proposed that Part 7 of the Charities Act is to apply only if the whole of the land is held by the charity solely for its own benefit or in trust solely for the charity.

At one stage in the (long and effective) consultation process it was feared that the proposed de-regulation of land transactions might risk charity property being approached with too light a touch, responding to understandable concerns by some large landholding charities (with highly competent in-house teams) that they were unnecessarily burdened by the costs of compliance.  It seems to us difficult to frame law that works in an ideal fashion for such charities and the huge range of smaller and less “property savvy” charities, given the importance of land assets to many charities and the huge range of property types and transactions the law looks to cater for.   

However, it seems that the proposed changes look to strike a good balance between protecting charity assets, maintaining the trust of the public and enabling charities to manage their land efficiently. 

If you have any queries in relation to the above or would like further information, please contact Chris Sharpe at ChrisSharpe@stoneking.co.uk.

The Charities Bill, featured in the Queen’s Speech on 11 May 2021 and introduced in the House of Lords on 26 May 2021, proposes a technical change to charity law in relation to gifts made by Will to merged charities.

Advising on charity mergers is a big part of the work we do at Stone King and mergers can really benefit all charities involved and their beneficiaries by generating cost efficiencies, reaching more people and diversifying and improving services. However, as the Law Commission’s 2017 report, ‘Technical Issues in Charity Law’ highlighted, a particular challenge arises when registering a merger on the Charity Commission’s Register of Merger as case law has demonstrated that not all legacies left to a closing charity will pass to the merged charity. This has therefore resulted in many charities with significant legacy income choosing to maintain the transferring entity as a ‘shell’ charity in order to avoid the risk of failed legacies.

The Law Commission’s report included a number of recommended reforms to the Charities Act 2011 to ensure that, in the case of a merger, a gift made by Will to the transferring charity is treated as a gift to the merged charity even when the old charity is named in the Will. The Government accepted the Law Commission’s recommendations and agreed that the proposals would facilitate merger between charities as shell charities would no longer need to be preserved.

The Charities Bill proposes that gifts left by Will to a charity which has since merged (as part of a ‘relevant charity merger’ within the meaning of section 306 Charities Act 2011) should be treated as a gift to the new merged charity and this will be the case even where the Will specifies that the gift will only take effect if the original charity continues to exist as at the date of the testator’s death. This change will apply to any legacies made by a testator who dies after the new Act is brought into force, even if the Will was executed before the commencement date of the new Act. However, please note that these proposed changes do not apply in cases where the Will contains a legacy which is intended to be held as part of the beneficiary charity’s permanent endowment.

In addition, there is currently no link between the Charity Commission’s Register of Charities and the Register of Mergers which can be problematic for executors when searching the Register of Charities for a beneficiary charity which has merged since the execution of the Will. However, the Charity Commission has confirmed that it is investigating whether, on registering a merger, a charity’s entry in the Register of Charities could include a reference to the registered merger.

The Government’s response to the Law Commission’s report on Technical Issues in Charity Law can be read in full here.

If you have any queries in relation to the above or would like further information, please contact Alice O’Mahony at AliceO’Mahony@stoneking.co.uk.

A draft law was approved by the French Assemblée National on Friday 2 July, which could see French forced heirship enforced in France, even where a testator has enacted the provisions of the European Succession Regulation and made a choice for Anglo-Welsh law to apply to the devolution of their estate.

Although the ‘clawback’ can only apply to assets in France, for charities this could make it much more difficult for testators to leave their assets to your charity, without family members enforcing a claim against the estate.

The law, which will appear under article 913 of the French Civil Code, appears to flout the spirit of the European Succession Regulation. However, it has to pass through the scrutiny of the French Constitutional Council before it passes into French law, and some observers believe that, even if it becomes French law, the European Court of Justice will overrule its provisions in due course.

Proponents of the new law point to the fact that its primary intention is to ensure equality as between male and female beneficiaries in cases where Shari’a law is being applied, but it is clear that the breadth of the drafting is such that it will affect far more ‘testamentary freedom’ cases, such as those involving England & Wales, than Shari’a cases, which are less common.

If you have any queries in relation to the above or would like further information, please contact Dan Harris, Partner and Head of Charity Legacy at danharris@stoneking.co.uk.

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