Bass v Warner & Anor

A person’s capacity must be assessed by reference to the particular transaction, even where the person may have capacity for other purposes. A transaction entered into by a person lacking capacity is not automatically a nullity. It is voidable where the other party knew or ought to have known of the incapacity. Money transferred into joint accounts remains the incapacitated person’s property where the evidence does not establish a gift or loan. A person who withdraws or uses those funds must account for them, subject to properly evidenced credits for expenditure on the person’s benefit.

The claim was brought by Marion Ann Bass, acting through her litigation friend, against members of her family concerning substantial financial transactions and the purchase and later repossession of a property. The transactions included an alleged gift to Rachel Warner, an alleged loan to Keithley Warner, withdrawals from Marion’s accounts, a mortgage and declaration of trust involving Thomas Warner, and a claim for occupational rent.

The court considered whether Marion had capacity when the transactions were undertaken, whether the documents relied upon were genuine and effective, who was liable for withdrawals and whether relief could be granted concerning the mortgage and beneficial ownership of the property.

1. Capacity. Marion lacked capacity at the material times. The assessment required two stages: identifying the relevant impairment, here dementia and alcohol abuse, and then determining whether its effect deprived her of capacity in relation to the particular transaction. Capacity for one purpose would not necessarily establish capacity to make substantial gifts or loans.
2. Alleged gift and loan. The documents relied upon did not establish a gift to Rachel or a loan to Keithley. The monies were transferred into joint accounts in Marion’s, Rachel’s and Keithley’s names, remained available as Marion’s funds and were withdrawn by Keithley. The alleged gift claim therefore succeeded for £20,588.52. Keithley was liable for £22,500 removed from the Halifax account and the additional £650.54 shortfall, as trust monies.
3. Further withdrawals. Keithley was liable for £15,768.23 withdrawn from Marion’s Lloyds account. He could receive credit for liabilities assumed to Birmingham City Council in respect of Marion’s care, with the precise amount to be dealt with on an account. Rachel was liable in principle for withdrawals from Marion’s Post Office account, subject to credits of £12,000 for care and accommodation and £760 for personal expenses.
4. Mortgage and trust. A transaction entered into by a person lacking capacity was voidable, rather than a nullity, if the other party knew or ought to have known of the incapacity. The mortgagee was not before the court, and the claim did not seek to set aside the declaration of trust. The court therefore made no determination adverse to the mortgagee and treated the mortgage and declaration of trust as standing for present purposes.
5. Property occupation. Thomas was found to have occupied the property from November 2006 until September 2011. An inquiry was directed concerning occupational rent referable to Marion’s 50 per cent beneficial interest and an account of mortgage repayments funded from Marion’s money. The defendants were ordered to pay the claimant’s costs.

This was a first-instance decision of the High Court. The judgment records that the Court of Protection had appointed Marion’s litigation friend as deputy on 5 July 2012.