Kicks & Anor v Leigh

For a substantial lifetime gift, mental capacity is assessed under the common-law principles in Re Beaney, rather than directly under ss 2 and 3 of the Mental Capacity Act 2005. The donor must have been capable of understanding the nature and effect of the transaction if its general purport had been fully explained. The legal burden remains on the person alleging incapacity, but the evidential burden may shift where sufficient evidence raises a real doubt.

Presumed undue influence requires a relationship of trust and confidence or ascendancy, and a transaction calling for an explanation. Once established, the donee must show that the transaction was made freely and after full, free and informed thought. A gift of substantially all the donor’s property may satisfy the second requirement even where the donor had capacity.

The claimants, grandchildren of the deceased, challenged the transfer of the net proceeds of sale of her home to the defendant, her daughter, and the defendant’s husband. They sought to set aside the transfer on grounds of lack of mental capacity or undue influence. The defendant had been debarred from defending the claim and appeared in person at trial.

The central issues were whether the deceased had capacity to make the gift and, if so, whether the gift was procured by presumed undue influence.

1. Mental capacity. The court applied the common-law test in Re Beaney. The relevant question was whether the deceased was capable of understanding the nature and effect of the gift if its general purport had been fully explained. Because the proceeds represented her principal asset and substantially affected the beneficiaries’ inheritance and her future care, a high level of understanding was required.
2. The Mental Capacity Act 2005 was principally directed to matters arising under the Act and the jurisdiction of the Court of Protection. Sections 2 and 3 did not directly apply retrospectively to the civil assessment of capacity to make an inter vivos gift. The court nevertheless considered the statutory test and concluded that, if applicable, it would have to operate alongside the common-law test without affecting the result.
3. The legal burden lay on the claimants to establish incapacity. The evidential burden could shift if their evidence raised a sufficient doubt from which incapacity could be inferred. The medical, lay and transactional evidence, considered in its totality, did not establish incapacity or raise a sufficient doubt requiring an answer from the defendant.
4. Undue influence. The relationship between the deceased and the defendant involved trust and confidence, ascendancy and vulnerability. The gift of nearly all the deceased’s principal asset was out of the ordinary and called for an explanation. The presumption therefore arose.
5. The defendant produced no evidence showing that the deceased acted free from influence and only after full, free and informed thought. There was no evidence of independent legal or financial advice concerning the gift, its effect on the will, or the deceased’s future care. The gift was therefore procured by undue influence and was set aside.
6. The claim based on incapacity failed. The undue-influence claim succeeded. The defendant was ordered in principle to pay £292,899.92 into the estate, with interest from 23 April 2010, subject to consequential submissions.