Williams v Williams & Anor

A gift is valid only if the donor understands its general nature and effect. The required degree of understanding depends on the transaction. Where a gift disposes of a substantial asset and creates continuing legal consequences, the donor must understand those consequences, including the nature of any co-ownership. Where incapacity is established and the transaction required careful explanation, the evidential burden may fall on the recipient to prove that an adequate explanation was given. A transaction made without the necessary capacity is void, not merely voidable. The court also applied the modern approach to undue influence, requiring proof that the donor’s decision was both properly informed and free from the influence of a trusted person.

The claimant, who had significant intellectual impairment, executed a deed conveying his house to himself, his brother and his sister-in-law as tenants in common in specified shares. He sought a declaration that the deed was void or an order setting it aside, alleging lack of mental capacity and undue influence. The defendants contended that he understood the transaction, that the gift was freely made, and that any relief should be adjusted because they had surrendered secure council accommodation in reliance on the arrangement. The central questions were whether the claimant understood the nature and effect of the gift, whether it was procured by undue influence, and what relief followed.

1. Capacity. The court applied Re Beaney [1978] 1 W.L.R. 770 and Re K [1988] Ch 310. The claimant had to understand the general nature and effect of this particular gift. It was insufficient merely to understand that he was giving away half the property. He also needed a general understanding of becoming a joint owner as tenant in common, the continuing implications of that arrangement, the claims of potential donees, and the extent of the property disposed of.
2. The claimant’s disability meant that the transaction required a careful explanation in plain English, repeated as necessary, with his understanding tested by asking him to explain the transaction in his own words. The evidential burden shifted to the defendants to establish that such an explanation had been given. On the evidence, it had not.
3. The deed was therefore void for want of capacity. The court rejected the submission that the gift was merely voidable and rejected reliance on change of position. The defendants’ good faith and loss of council accommodation did not validate the gift or justify withholding relief.
4. Undue influence. Applying Royal Bank of Scotland plc v Ettridge (No 2) [2002] 2 A.C. 773, the court treated the case as one of undue influence without a relevant distinction between that doctrine and unconscionable bargain. The claimant reposed trust and confidence in the first defendant, the transaction was plainly disadvantageous, and the defendants failed to show both that the decision was properly informed and that it was free from influence.
5. The gift was held void. The court rejected the proposed modified relief and adjourned the question of the form of order.