Proprietary estoppel and testamentary capacity in James v James [2018] EWHC 43 (Ch)

HHJ Paul Matthews, sitting as a High Court Judge, has recently revisited the ingredients of proprietary estoppel and the requirements for establishing testamentary capacity in James v James [2018] EWHC 43 (Ch).

The case has been widely reported in the press, including the Daily Mail, whose take on the case was put as follows:

“Farmer’s son who devoted his working life to his father’s farm is left with nothing after losing bitter legal battle with his elderly mother and sisters over the £3m property.”

That, and the remainder of the Mail’s report, which has a lot to say about the submissions put forward to Sam but less to say about the facts found by the court, is an (unsurprisingly) inaccurate reflection of HHJ Matthew’s carefully reasoned decision.  

The background

The dispute concerned the estate of, Charles James, who died on 27 August 2012, aged 81 years. He was survived by the claimant, his son, known as Sam, and by the defendants, his wife Sandra, and his daughters Karen and Serena.

Charles had built up a farming and haulage business and had acquired various parcels of land in the Dorset area. In 2007, he gave away some of his land to Karen, and in 2009 he transferred another parcel of land and the haulage business to Sam following the dissolution of the family farming partnership. The remaining land was disposed of in his last Will of 2010, which provided for some land to go to Karen and otherwise for the farm to be held for Sandra for life, with the remainder to Serena. Nothing was left to Sam.

Sam contended that the 2010 Will was invalid for lack of testamentary capacity and further, and in any event, that he was entitled to the remaining land in the Charles’ estate (known as Pennymore Pitt Farm) and some of the land given to Karen, by reason of a proprietary estoppel arising in his favour.

The decision on proprietary estoppel

HHJ Matthews sets out the familiar statement of Lord Walker in Thorner v Major [2009] 1 WLR 776  [29] of the doctrine of proprietary estoppel:

“the doctrine is based on three main elements..: a representation or assurance made to the claimant; reliance on it by the claimant; and detriment to the claimant in consequence of his (reasonable) reliance”

The promise

In relation to the question as to how clear the assurance must be. HHJ Matthews cites Hoffman LJ’s statement (cited with approval in Thorner v Major) in Walton v Walton [1994] CA Transcript No 479 (in which the mother’s ‘stock phrase’ to her son, who had worked for low wages on her farm since he left school at 15, was ‘You can’t have more money and a farm one day’) [16]:

“The promise must be unambiguous and must appear to have been intended to be taken seriously. Taken in its context, it must have been a promise which one might reasonably expect to be relied upon by the person to whom it was made.”

Sam was unable to point to any particular promise or act creating an expectation, intended to be relied upon, that Charles would leave any particular property to him, let alone the whole of it. That would not, following Thorner v Major, necessarily be fatal to his claim: the court must look at the totality of the evidence of what passed between the parties and form a view as to whether it was intended, or whether a reasonable man would have taken it to have been intended, to amount to such an assurance.

The difficulty for Sam was that there was, in HHJ Matthews’ judgment, nothing with a sufficient degree of clarity here to amount to such an assurance. There had been occasions where Charles told Sam what his testamentary intentions were. But a statement of current intentions as to future conduct is not a promise of that conduct, let alone a promise intended to be acted upon. As, the judge pointed out, even if Charles had followed through on those intentions, making a will in favour of someone is not the same as promising to leave property to that person. It is ambulatory, merely a statement of current intention, and can be changed at any time.

HHJ Matthews placed emphasis on Charles’ personality, which was an important part of the context in which any statements fell to be construed.

Sam’s evidence had been that Charles wanted to keep all the assets in his own name as long as possible, and, although he liked to make decisions, he would not make them until he was good and ready. He had stated in evidence that he did not accept that Charles would give away any of his land during his life. For this reason, the judge concluded that Charles did not easily make promises to transfer property, let alone actually transfer any of it. To Charles, “money was God.”

The high point of Sam’s case in relation to an assurance was his evidence that, before buying further land Charles had asked Sam whether he should buy it, because (as Sam put it) “I would be farming it one day“. HHJ Matthews accepted that Charles had said words to this effect to Sam, at least twice. But the meaning of words which are spoken (as opposed to written) is a question of fact: see Carmichael v National Power plc [1999] 1 WLR 2024; Thorner v Major [2009] 1 WLR 776.

These comments needed to be considered in the context in which they were made and in the light of the personalities of the two persons involved (in particular Charles’ reluctance to make any commitments). HHJ Matthews found that [35]:

Sam’s eagerness to inherit the farmland from his father has caused him to persuade himself that he was being promised something when he was not. In my judgment, the testator did not intend his words in that way, and did not intend them to be relied upon subsequently by Sam. It is not consistent with the image of the testator as someone who kept everything in his own hands and did not confide in others. Moreover, a reasonable person would not have misinterpreted the testator’s words and actions in this way.

Against that background, the comments made by Charles James did not amount to a promise or assurance to leave the property to Sam. Really, these comments reflected nothing more than him acknowledging that one day he would die and would have to pass the land to the next generation and, at the time that he made these remarks, Sam was the obvious person to leave it to. Statements of intention of this sort are not promises intended to be acted on. HHJ Matthews remarks [38]:

“there is sufficient place in our legal system for a landowner to be able to express a present intention to leave property by will to another person but without making any promise to do so, such that he or she is not then bound so to leave the property even if that other, misunderstanding what the landowner has done, purports to rely to his or her detriment on a supposed promise.”

Detriment and reliance

A claimant must show that he has relied on the promise or expectation created to his detriment. There must be a sufficient (though not necessarily exclusive) causative link between the promise relied on and the detriment. However, where promises are made, and there is conduct from which inducement to act in reliance may be inferred, there will be an evidential burden on the landowner to show that there was no reliance.

Sam’s case further lacked the necessary reliance and detriment to found a proprietary estoppel.

Sam could not demonstrate sufficient detriment. This was not the classic proprietary estoppel scenario where a claimant works for nothing, or very little, on the strength of assurances that they would inherit the farm. Sam had been properly paid the going rate for farm work, had been bought cars (which had been shown in the business accounts as ‘bonuses’), had occupied a property rent-free, had been made a partner in the family business and in time had received some land, cash and the haulage business.

There was further no evidence of reliance. Sam had not ever thought seriously about going away to make his fortune in some other industry or occupation. The suggestion that Sam had positioned his whole life on the basis of the assurances given to him and that he had worked extremely hard to develop and make successful the farming haulage business was rejected – in fact, HHJ Matthews found that although Sam had worked hard in the haulage business (which he had in any event received), the same could not have been said of the farm – “he was never as interested in farming as he was in lorries“. His own farming ventures had failed because he did not look after them, and had declined the opportunity to farm available land when it had been offered to him.

Submissions on behalf of Sam placed reliance upon Suggitt v Suggitt [2012] WTLR 1607, in which there was no evidence that the promisee would have pursued another career, and yet his claim succeeded. This did not find favour with HHJ Matthews. The judge at first instance in Suggitt had been satisfied, in any event, that the claimant had placed reliance upon the promises made to him (whereas HHJ Matthews was not). The Court of Appeal had dismissed the appeal in Suggitt on the basis that the trial judge’s findings were unassailable but the case did not establish any point of principle.

Relief: expectation, detriment and proportionality

The question of whether or not there needs to be a relationship of proportionality between the level of detriment and the relief awarded, is a controversial one. The controversy stems from the fact that the conceptual basis of proprietary estoppel is not wholly settled: is the object of the doctrine to award a remedy that gives effect to the promises made, or is the remedy focused on compensating the detriment suffered by the promisee?

It is well settled that the remedy in a successful proprietary estoppel case will not invariably be to give the claimant that which they were promised and that proportionality has a role to play. The Privy Council in Henry v Henry [2010] UKPC 3 at [65] said this: “Proportionality lies at the heart of the doctrine of proprietary estoppel and permeates its every application.” 

Given all of the above, this was not a live issue in the case. Nonetheless, HHJ Matthews did express his view on the relevance of proportionality, comparing views expressed in Davies v Davies [2016] EWCA Civ 463 with those expressed in Suggitt:

  • In Davies v Davies [2016] EWCA Civ 463, Lewison LJ appeared to endorse a suggestion put forward by counsel in that case that there should be a sliding scale approach, whereby greater weight would be given to expectation in cases where there is a clearer expectation, greater detriment and a longer passage of time during which the expectation was held.
  • In Suggitt (which was cited in Davies),  at [43] Arden LJ referred to the judgment of Robert Walker LJ in Jennings v Rice [2002] EWCA Civ 159, where he had said that, rather than to simply fulfil the claimant’s expectations: “if the claimant’s expectations are uncertain, or extravagant, or out of all proportion to the detriment which the claimant has suffered, the court can and should recognise that the claimant’s equity should be satisfied in another (and generally more limited) way.” Commenting on this statement, at [44], Arden LJ said that this: ”does not mean that there has to be a relationship of proportionality between the level of detriment and the relief awarded“.

HHJ Matthews, for his part, comes down on the expectation fulfilment side of the debate stating as follows: 

51. For what it may be worth, I agree with what Arden LJ said. Proprietary estoppel is a doctrine which, like the law of contract, focuses on expectations created rather than losses suffered. So if A promises B some property right, intending B to rely on this, and B does rely on it to B’s detriment, the natural impulse is (as with contract law) to require A to make good the expectation. Making the remedy proportionate to the detriment suffered would be to focus more on what B has lost, rather than on what B expected to obtain.

52. But of course proprietary estoppel is not as strict as contract law. It is also an equitable doctrine, and therefore tempered by conscience. So there may be exceptional cases where (as Robert Walker LJ said) it is just not right to require A to go the whole length of satisfying the expectation created. In those cases, there may be another way to satisfy the equity raised, without however necessarily requiring the remedy to be proportionate to the detriment. For myself I respectfully doubt how far a “sliding scale” approach would be useful. Just as a contract is either made and broken or not, either the promisor has created an expectation, on which the promisee has relied to his or her detriment, or not. But on the facts of this case the point does not arise, and I will say no more about it.

Learning points for practitioners

  • Whilst there is flexibility in the degree of clarity that is required before the courts will find that a promise has been made so as to found a proprietary estoppel claim, mere expressions of current intention to act in a particular way in the future may not, without more, be enough. In construing statements made, context, and in particular the personalities of the parties, will be of particular importance.
  • Whilst it was not expressly put in these terms by HHJ Matthews, it is also important to evaluate the benefits that may have flowed in the claimant’s direction in considering whether or not the claimant can establish detriment of the order required to successfully establish an estoppel in their favour. Here, there was in fact a fairly significant flow of benefits in Sam’s direction and he could not establish sufficient detriment.
  • Whilst there may be cases where the courts will be prepared to find reliance, notwithstanding the absence of any positive evidence that the claimant would pursue another career, the view of HHJ Matthews was that there is no point of principle established in Suggitt to the effect that such evidence is not required. The suggestion that he had positioned his whole life on the strength of the assurance he believed to have been made to him did not stand up to scrutiny, in Sam’s case.

The decision on testamentary capacity

HHJ Matthews considered a number of High Court authorities that appeared to suggest that the traditional test for testamentary capacity had been superseded or supplemented by the Mental Capacity Act 2005: Fischer v Diffley [2013] EWHC 4567 (Ch), Gorjat v Gorjat [2010] EWHC 1537 (Ch) and Bray v Pearce, unreported, 6 March 2014.

HHJ Matthews preferred the ruling in Walker v Badmin [2014] EWHC 71 (Ch), to the obiter views expressed in the earlier cases. Unlike the earlier cases referred to above, this was a case where all the relevant events arose after the coming into force of the 2005 Act. Nicholas Strauss QC, sitting as a deputy judge, heard full argument, reviewed all the available caselaw, and held that the test in Banks v Goodfellow not only had survived the enactment of the 2005 Act, but that it, rather than anything in the Act, was still the sole test of capacity for judging will-making capacity in retrospect.

The reasoning for the decision in Walker was as follows:

  • Tests under the earlier caselaw on testamentary capacity and the 2005 Act were not the same: there were significant differences between them. These included (i) the incidence of the burden of proof, (ii) the degree of understanding of relevant information at the time, and (iii) the degree of understanding of the consequences of making the will. 
  • The 2005 Act sets out the test for mental capacity “for the purposes of this Act” (ss1(1), 2(1)). These purposes were “to define the circumstances in which living persons are able to take decisions or, where they are not, when and how decisions can be made on their behalf“. Although ss 16(2) and 18(1) of the 2005 Act enable the court to make a will for a person lacking capacity, this relates to living persons who lack capacity, and “[t]here is nothing in the Act which explicitly or impliedly provides that one of its purposes is to govern or in any way affect the decision of a court, after his death, as to the validity of a will which has been executed by the testator himself” ([28]). 
  • It was not unsatisfactory not to have a single test for capacity applying to both “the prospective task of the Court of Protection of deciding that a living person does not have capacity” (so that a will can be made for him) and “the retrospective task of the Chancery Division of assessing whether a will made by the testator himself was valid” ([29]). The two situations arose at different times and the nature of the two decisions was quite different. 
  • The traditional threshold for testamentary capacity has been low, so as not to deprive elderly persons of the particular ability to make wills in their declining years. It was thus “unlikely that the legislature intended the detailed caselaw on testamentary capacity in relation to the testator’s own dispositions to be replaced by a single definition applicable to a wide variety of decisions which might be taken on behalf of living persons” ([34]).

HHJ Matthews therefore held that the test for testamentary capacity has not changed following the enactment of the Mental Capacity Act 2005 and that traditional test for testamentary capacity applied, as laid down in Banks v Goodfellow (1890) LR 5 QB 549, per Cockburn CJ, which provides that the testator shall understand:

(a) the nature of his act and its effects

(b) the extent of the property of which he is disposing and

(c) the claims to which he ought to give effect

and that no disorder of the mind or insane delusion shall bring about a disposal of his property which he would not have made if he had been of sound mind.

The facts relevant to the decision on testamentary capacity, in summary, are as follows.

In 2004, Charles had given instructions to his solicitors to draft a Will which included a gift of Pennymore Pitt Farm to Sam. A draft was produced but was never signed, seemingly because Sandra, upon learning of the proposed Will, had challenged Charles about it as she felt that it was not fair to her daughters and that there should be a more even distribution of family assets.

There was evidence that Charles had been “not as formidable as he had once been” from about 2004 onwards. Although there was no diagnosis of dementia, there had been discussion with his GP about memory loss in January 2005. A biochemical screen was carried out but everything was within normal limits.

His GP records noted that he had attended his surgery on 21 September 2007 and repeated himself several times, although he said his memory was not causing him trouble. It was in this year that he had transferred some land to Karen amounting to about 200 acres. When he was subsequently asked about this by Sam, he insisted that it had only been 60 acres.

He met his solicitor and accountant in March 2009, to discuss the future of the partnership. A decision, on advice, was taken to dissolve the partnership, following which Sam received the haulage business, cash and some land. There was no suggestion that Charles did not have the capacity to do this.

He was referred to the Community Mental Health team in October 2009 by his GP, who noted that he had been suffering for some years from “short-term memory loss and spells of quite profound confusion“. The Community Mental Health nurse reported back to his GP, after visiting Charles at home, noting that he had experienced problems with his memory for the last 3 years and could no longer manage the farm or drive a car, although he occasionally drove a tractor.

He saw his solicitor again around this time, at the instigation of Sandra, and gave instructions to transfer the farm into their joint names. The solicitor expressed some concerns about whether or not this was being done of his own free will. Nonetheless, the transfer went ahead.

His patient records from January 2010, when he was treated for a shoulder injury, record, under previous medical history, that Charles had dementia/Alzheimers but there was nothing to say whether or not this was a formal diagnosis by a medical professional, rather than a comment by an accompanying family member that had been noted down.

In May 2010, Charles gave instructions for a new Will. He saw a new solicitor, Ms Thomas, who had not acted for him previously. He and Sandra gave their instructions for their Wills together. The solicitor’s attendance note made no reference to capacity having been considered, although it recorded that she was confident that Charles understood everything and further that Sandra had informed her that he might be under Sam’s influence.

The terms of the two Wills, drafted following this meeting, provided that part of the farm to the north of the A30 would pass to Karen and the part to the south, including the farmhouse, would be subject to a life interest for the survivor of the testator and Sandra, after which it would pass to Serena.

On the date of execution of the Wills, on 16 September 2010, Ms Thomas saw Charles and Sandra separately. Charles expressed reluctance to sign the Will and said he could see little point in it and appeared to be concerned that he would die if he signed the Will. The Wills were discussed in the presence of Sandra, who expressed the view that there was a need to redress the balance between the three children and noted the provision that had already been made for Sam and Karen but that Serena had so far had little. Charles stated that all he wanted to do was to make sure that Sandra was provided for. He said that she could have the lot, but that he appreciated that the balance needed to be redressed between the children. The values of the assets that Sam and Karen had already received and of Pennymore Pitt Farm were discussed. He said he would sign if his wife was happy with it and both he and Sandra signed their Wills.

The evidence of the solicitor was that Charles was interactive and showed no signs of confusion or ill health at the three meetings she had had with him and that she did not therefore consider that a medical opinion was required. She was happy that he had sufficient capacity. She did accept that his behaviour at the meeting when the Wills were signed was unusual, but did not consider that he lacked capacity and observed that he was happy with the terms of the Will.

In May 2011, he was seen by a doctor specialising in old age psychiatry who made a diagnosis of “probable moderate dementia with frontal lobe impairment” and said he did not think Charles “has the basic capacity to make decisions about his health care, where he lives or his finances”.

Two experts gave evidence in respect of Charles’ capacity at trial on the basis of examining the medical records and other documents. They both agreed that he had moderate dementia at the time of making his Will and both agreed that he sufficient capacity to understand the nature and consequences of the testamentary act and the nature of his estate, but disagreed on the question of whether or not he had the capacity to appreciate the claims of his children. Both experts agreed that the situation was not clear cut and it was of no surprise to either of them that the other disagreed.

HHJ Matthews considered that there was sufficient evidence to raise a real doubt about the capacity of Charles, such that it was for the propounders of the Will to demonstrate, on the balance of probabilities, that he satisfied all three limbs of the test in Banks v Goodfellow. He concluded that Charles did possess the requisite capacity and that the Will was accordingly valid:

116. I have taken into account all the evidence before me, including that of the experts. I accept that the testator suffered from memory loss and confusion from time to time, and even some irrational behaviour. But there is also considerable evidence of normal behaviour and rational thought. I am particularly struck by the evidence of Ms Thomas (which I accept) that immediately before signing his will the testator “appreciated that the balance needed to be redressed between their three children”, and that she explained to the testator the values of property which the children had already had and might expect to have under the wills as drafted. It is also a fact of some importance that the terms of the wills as executed corresponded closely to the terms of the instructions for the wills originally given by the testator some months before, in May 2010. I also bear in mind that, compared to some cases, this testator had relatively few claims upon his inheritance to consider, namely those of his wife and his three adult and emancipated children, and a fairly straightforward (if nevertheless valuable) estate to dispose of, largely consisting of land close by to him which he had worked on during his life and knew well, and some cash or cash-equivalent investments. The simpler the estate and the fewer claimants, the less difficult it is to dispose of, and accordingly the less acute the faculties required to do so successfully.

117. In my judgment… the will which the testator instructed to be drafted and which in substantially the same form he executed demonstrates a rational and balanced approach to the disposal of the testator’s estate, bearing in mind the transfers that had already been made in 2007 to Karen and in 2009 to Sam (following the dissolution of the partnership) and later to Sandra. Of course, if it had been shown that the testator promised to give particular land to Sam then, whether or not Sam relied to his detriment on that promise, that would be a matter to be taken into account in assessing how far the testator had capacity to appreciate the claims on his inheritance. But, as I have already held, there was no such promise or assurance given to Sam.

 

Learning points for practitioners

  • This is an authoritative decision in favour of the proposition that the MCA 2005 has not superseded the Banks v Goodfellow test.
  • The case demonstrates that the threshold for establishing testamentary capacity is in fact rather lower than is often thought to be the case. The evidence was considered sufficient to displace the presumption of capacity that applies were a Will is rational on its face and to require the defendants to satisfy the court, on the balance of probabilities, that Charles possessed capacity. Notwithstanding the evidence that Charles was suffering from memory problems and most likely had moderate dementia at the date of the Will, and the evidence of unusual thinking on the occasion of the signing of the Will, he was found to have capacity and significant weight was placed on the views of the solicitor who dealt with the Will. This is in line with other recent decisions, including that of Gorjat in which statistical evidence concerning MMSE scores and testamentary capacity was examined. It was noted by Professor Howard on behalf of the defendants and conceded by Professor Jacoby for the claimants, in Gorjat, that statistically, approximately 50% of people scoring between 10/30 and 20/30 on the MMSE were also found to have testamentary capacity. The evidence of friends, family and, in particular of solicitors who are familiar with the Banks v Goodfellow test, will often be accorded greater weight than the medical or expert evidence in determining whether or not a testator had capacity.
  • A lower level of capacity is required where the estate is comparatively straightforward and there are fewer claimants to consider – as was the case here notwithstanding the value of the estate.

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