High Court Upholds 19th Century Test For Mental Capacity

Choosing to challenge a Will is not a decision to be taken lightly.  Any experienced, highly-regarded Civil Litigation Solicitor will tell you that testamentary freedom is a cherished part of English law and not one that the Courts are prepared to readily tamper with.  However, there are some cases where it is abundantly clear that something went wrong when the Will was made, and the Courts must intervene. 

The recent High Court decision in Re Clitheroe (Deceased) [2021] EWHC 1102 (Ch) is an example of where the Courts will uphold a challenge to a Will.  Furthermore, it confirmed that despite being decided in 1869, the test for testamentary capacity set out in Banks v Goodfellow remained good law.

The background to the decision

The Respondent, Sue Bond was almost entirely cut out of her mother’s Will.  The Testator called the Respondent a ‘shopaholic’ and believed her daughter would ‘fritter away’ any money left to her.  The Testator had also accused the Respondent of stealing various items from her home including her treasured set of Harry Potter books.  Therefore, she bequeathed most of her estate to the Appellant, Ms Bond’s brother.

The County Court Judge found that the Testator’s beliefs were irrational to the point of being delusional.  He also accepted expert evidence that showed the Testator was suffering from an affective disorder which included a complex grief reaction and depression which impaired her testamentary capacity.

Ms Bond’s brother appealed the decision on the grounds that the County Court Judge should not have applied the Banks v Goodfellows test and instead should have applied the test under the Mental Capacity Act 2005.  He also argued that the Judge had misapplied the test regarding whether the Testator suffered from delusions when he said it was not necessary to prove that she could not be talked out of her beliefs.

The High Court’s ruling

The High Court reviewed the case law which confirmed that the Banks test had not been superseded by the Mental Capacity Act 2005.  Under the Banks test, the following needs to be present for testamentary capacity to exist:

  • The Testator must understand the nature of making a will and its effects.
  • The Testator must understand the extent of the property of which they are disposing.
  • The Testator must be able to understand and appreciate the claims to which they ought to give effect (i.e. who can bring a claim against the Will).
  • The Testator must have no disorder of the mind that perverts their sense of right or prevents the exercise of their natural faculties in disposing of their property by Will.

The Court observed that there was nothing within the Mental Capacity Act 2005 indicating that determining the validity of a Will was one of its purposes or powers.  Although it was important not to simplify the distinction between the test for capacity under the Mental Capacity Act 2005 and the Banks test to merely one of whether the person whose capacity is in question is living or dead, it was relatively clear from the terms of the Act that Parliament did not intend to alter the common law test for testamentary capacity provided by the 152-year-old case.

Regarding the correct test for delusion, the Court once again turned to an ancient case, that of Dew v Clark and Clark 162 E.R. 410, [1826] 1 WLUK 63 which established the legal concept of ‘insane delusion’ –  a Testator’s false conception of reality that may invalidate a Will altogether, or one or more of its provisions.  For a delusion to exist, it had to be:

  • more than a simple mistake that could be corrected
  • irrational and fixed in nature, and
  • out of keeping with the Testator’s background.

Justice Falk concluded that Dew did not lay down an absolute rule that a delusion could only exist if it were shown that it was impossible to reason the Testator out of the belief. 

The case was adjourned for three months to offer the siblings a chance to reach an agreement without the expense and distress of a further Court hearing.

Comments 

This case is one of many clarifying that the Banks v Goodfellow test remains good law in testamentary capacity cases.  Further test cases will inevitably be brought in the future, however, for now, the Courts have made clear that Banks may be an ‘oldy’ but it is still a ‘goody’.

Please note that this blog is intended for information purposes only and does not constitute legal advice. 

Coronavirus and Force Majeure

In this post, we review how specific Force Majeure provisions in business contracts could be engaged within the context of the COVID-19 epidemic under English law and consider safeguarding steps that can be taken in light of the evolving COVID-19 situation.

A Force Majeure event specifically relates to an event that is outside the reasonable control of an entity and is such an event that prohibits or prevents the entity from performing its contractual obligations.

What to do if you have a Force Majeure provision in your contract

If a party wishes to try and claim relief for a Force Majeure event, then the terms of the contract, specifically the Force Majeure provision, will need to be considered. Any party that is affected by a Force Majeure event will usually be relieved from their obligations to perform a service or obligation, and to the extent, they are affected, they may be entitled to receive compensation. While each event will need to be considered in relation to any contractual terms, there are some common features of Force Majeure provisions that we will expand on below.

What type of event constitutes Force Majeure?

Usually, the test of whether or not an event constitutes Force Majeure will come down to whether or not the following points can be satisfied or not.

  • The affected entity must be able to demonstrate they have taken all possible reasonable steps to mitigate or avoid the event or its potential consequences.
  • The event must be deemed to be beyond any reasonable control of the affected entity.
  • The affected entity’s ability to undertake its contractual obligations must have been impeded, prevented, or hindered by the event.

In the case of a valid Force Majeure event, the consequences for all parties will usually depend on the contractual obligations, along with the points expressly outlined by the Force Majeure provision in the contract. In some cases, this will allow a time extension for the purpose of carrying out any obligations or a suspension of contractual performance for the duration of the event. If the Force Majeure event is extended over a long period of time, there may also be such provisions that entitle the parties to undertake a termination of the contract.

What to do if you DO NOT have a Force Majeure provision in your contract?

If you do not have a provision in your contract for Force Majeure, but find yourself in a situation where either yourself or a contractor is unable to fulfil obligations due to such an event, then this section aims to offer some initial guidance.

The Doctrine of Frustration is something that parties can potentially rely upon in the absence of a provision for Force Majeure in an English Law Contract. It will typically be applicable if:

  • The circumstance or event takes place following the contract formation and was not foreseen by either party
  • The ‘event’ is no fault of either entity
  • It is either commercial or physically impossible to fulfil the contract, or where the obligation would need to radically be transformed compared to the initially outlined obligation.

The end-result under the Doctrine of Frustration being that contract will automatically come to an end, and each party will be relieved of their obligations to perform any future work under the contract. The threshold for proving frustration is higher than many Force Majeure provisions, and this is typically due to the fact that it must be proved that any impacted obligations are fundamental to the contract.

There could also be a ‘change in law’ provision in a contract that specifically addresses situations that involve a change in law and whereby such changes make it impossible for the party to carry out any contractual obligations. If this occurs, then parties may incur costs associated with the reimbursement for any affected parties, and in certain situations, there will also be a right to terminate the contract.

Practical Steps for Clients

To help your business prepare for different scenarios that could occur, review the following steps, and try to be as proactive as you can.

  • Review any contracts to see whether or not there is a Force Majeure Provision
  • Review your insurance coverage documents to determine whether or not your insurance will cover any such losses; this could be either a Business Interruption or Force Majeure Insurance policy.
  • Review your financial documentation to consider whether or not there are any notice periods that will need to be complied with relative to any perceived claims for Force Majeure.

If a clause for Force Majeure is present:

  • Review the Force Majeure definition to try and determine if there is are any express events that include a pandemic or epidemic such as COVID-19. If not, try and ascertain whether or not the generic language is adequate enough to reasonably include COVID-19 as a potential Force Majeure event.
  • Consider which elements of the contract you will not be able to perform as a direct or indirect result of COVID-19.
  • Think about any steps your company will take to try and reduce or avoid the effects of COVID-19 on your staff and your business. This is key as you will need to demonstrate that you have taken all and any reasonable steps while following the government guidance.
  • Review the potential consequences for a successful Force Majeure claim

Getting legal advice about Force Majeure claims as early as possible in the process is key.

Force Majeure under PRC Law

 There are many businesses in the UK and, indeed, the rest of the world who deal with goods imported from China. As such, understanding how Force Majeure events are regulated under the People’s Republic of China (PRC) is relevant.

As expected, the best place to start is with the contract and any relevant provisions that are made for Force Majeure events. As COVID-19 is a relatively new ‘event’, it’s possible but unlikely that any specific clauses will relate to COVID-19; however, there is the potential for a pandemic or disease-related clause to be present. In addition to pandemic, plagues, and disease clauses, work stoppages or actions by governments and authorities could also cover this type of event.

Where there are no such provisions, the consideration of whether or not an event could be considered to be a Force Majeure event will rely on any relevant PRC laws or regulations; for instance, the General Principals of Civil Law and the PRC Contract law. In both instances, a Force Majeure event is defined as something that ‘objectively unforeseeable, insurmountable, and unavoidable. This means that any party who is prevented from fulfilling a contractual obligation due to a Force Majeure event could be either fully or partially exempted from their subsequent liabilities, proportional to the given circumstances only. Additionally, it is down to the invoking party of the defence to prove the impact of the Force Majeure event.

There are some high courts; for instance, the High People’s Court in the provinces of Guangxi, Zhejiang, and Shanghai have already taken steps to release guidance documents that directly relate to COVID-19. These confirm that the present-day epidemic could be a Force Majeure event. In addition, the China Council for the Promotion of International Trade has already started to provide Force Majeure certificates to companies in China who are experiencing challenging times with their overseas partners as a direct result of the COVID-19 epidemic.

Regardless of the jurisdiction, Force Majeure’s applicability should always be decided on an individual case-by-case basis.

Drafting Contracts During COVID-19

As a final consideration, going forward, and in any future contracts, it would be wise to address the implications of the COVID-19 epidemic. Some of the key points to include could be defining a ‘triggering event’ to either include to exclude events such as public health crisis, epidemic, state of emergency, etc. It would also be pertinent to review whether disruptions to labour and/or supply chains should be addressed in advance and form part of the contract.

To help mitigate any potential losses or problems, our Company and Commercial team at OGR Stock Denton can help you with any contractual preparations.

If you have any questions about your contractual obligations or would like help with a potential claim for Force Majeure, our dispute resolution solicitors at North London firm OGR Stock Denton  can give you the guidance needed to know exactly where you stand.

If you’d like to know more about the enforceability of Commercial Contracts during the COVID-19 epidemic, our linked article provides more information on this topic

New Coronavirus insolvency legislation proposed

The Corporate Governance and Insolvency Bill (the Bill) has been introduced in Parliament to support businesses that are struggling as a result of the Coronavirus pandemic.

The Bill includes six new insolvency and two corporate governance measures that seek to address the challenges that businesses are facing.

The Bill includes:

  • A new moratorium to give companies breathing space from their creditors while they seek a rescue.
  • A law that prohibits termination clauses that engage on insolvency, preventing suppliers from ceasing their supply or asking for additional payments while a company is going through a rescue process.
  • A new restructuring plan that will bind creditors to it.
  • A temporary suspension of personal liability for wrongful trading from directors who try to keep their companies afloat through the emergency.
  • A ban on creditors filing statutory demands and winding up petitions for Coronavirus related debts in certain circumstances.
  • Rules that ease the burdens on businesses by enabling them to hold closed Annual General Meetings (AGMs), conduct business and communicate with members electronically, and by extending filing deadlines for:

– confirmation statements

– annual accounts

– registrations of charges (mortgage)

– event-driven filings, such as a change to your company’s directors or people with significant control.

These measures will be applied retrospectively so as to be as effective as possible. It is hoped that the Bill and its measures will enable the insolvency regime to flex to meet the demands of the current emergency.

The Bill, introduced on 20 May, will now make its way through Parliament. Many of the measures in the Bill will need secondary legislation before they come into force, and this will be introduced in due course. Nothing will change until legislation is formally introduced.

Enforceability of Commercial Contracts (COVID-19)

Many businesses today are struggling to cope with the pressures of the COVID-19 outbreak. As well as causing unprecedented health difficulties it is also giving rise to huge economic problems around the world.  These will in turn give rise to many legal disputes.

The outbreak will have caused huge problems for supply chains being unable to manufacture or produce goods, due to a lack of workers as staff adhere to the strict quarantine measures imposed by government to contain the virus. This inevitably will result in businesses being unable fulfil contracts to supply goods or services.

The question arises as to whether a party is able to cancel the contract and whether damages would be available as a result.

Under English law, there are two potential contractual methods of escaping liability for breach of contract. These are Force Majeure and Frustration. It is important to understand that these two concepts are completely different and operate independently.

Force Majeure operates as a specific express term in the contract, which tends to identify events and circumstances, which if they occur, would entitle the party to serve notice that the event is one which is beyond their control.

The Force Majeure clause in the contract will outline what has been agreed between both parties, such as:

– the events which will entitle either party to declare a Force Majeure

– how a party should notify the other of a Force Majeure event

– how to deal with the consequences which flow from declaring a Force Majeure.

However, as in all legal issues, the devil will be in the details

It is highly likely that government will issue Force Majeure certificates to assist businesses seeking to rely on the clause. However, contracting parties will still need to agree, as if not the courts will have to determine whether a Force Majeure event has occurred and also, very importantly, whether a party has effectively taken the necessary steps to mitigate the loss.

It is important to note that when agreeing a Force Majeure clause, parties can also agree the consequences which might follow such an event, including whether contractual obligations are suspended, whether liability accrues or is capped and rights on termination.

Frustration is entirely different to Force Majeure. Frustration relies on a party to prove that, as a result of the outbreak, it has become simply impossible to fulfil the contract. This will of course give rise to examination of the particular facts of each situation which is bound to centre on the argument of what was possible as opposed what was impossible.

Businesses seeking to rely on these contractual methods of escaping liability during this current pandemic, will still find it is going to be quite difficult to prove. If a business does seek to rely one of these methods incorrectly, then the other party may argue that assertion has of itself has given rise to a breach of the contract. This could give the other party a right to claim damages or even treat the contract as terminated.

The government has taken and is continuing to take significant steps, in offering financial support across the economy to assist in these difficult times. It seems that there is a likelihood that businesses may be forced into delaying payment for goods or services. Companies should be aware that this might attract interest under the terms of the contract, as well as a statutory right to interest under The Late Payment of Commercial Debts (Interest) Act 1998. However, businesses will be acutely aware that if a company is put into some form of insolvency, there more often than not, very little dividend. It therefore seems that businesses are going to have to be realistic in this difficult time and renegotiate terms.

It would be advisable, where you have contracts of any significant size, for any extensions or variation of terms to be expressly agreed in writing between both parties, so that there is clear evidence as to what terms have been altered and what has actually been agreed.

In terms of court proceedings, whilst there may be some latitude on the deadline for issuing proceedings, where a limitation deadline is in place, there will have to be clear evidence that a representative was unable comply with the relevant timetimes. Once proceedings begin, there is likely to be a delay to comply with any directions but again this will require evidence. The high court in particular is encouraging parties to communicate by telephone or potentially by video link where possible.

Sports Direct employment agency files for insolvency

Transline Group, the employment agency which provides staff to Sports Direct, is preparing for insolvency as it continues to struggle to find investment.

The agency said it was suffering from “tighter margins in the recruitment industry”, but would protect its “business, employees and customers”.

It filed its “notice of intention of appointment administrators” at a court in Leeds, it has been reported. It will give them 10 days to secure financial stability or begin liquidating the company.

In a statement, a Transline spokesperson said: “We are close to securing inward investment that will allow us to drive forward with continued growth and infrastructure development.

“We expect to hear more regarding potential trading investments imminently.”

In 2015, the group were embroiled in a Sports Direct scandal after an investigation revealed that its workers were being paid less than minimum wage and were subject to controversial discipline measures.

MPs compared its working practices to those of a “Victorian workhouse”.

The Transline statement said: “[We] have lodged the ‘notice of intention’ to protect the business, our employees and our customers as we complete this process.

“The welfare of our staff and our relationships with our customers are of paramount importance, and we are continuing our service and operations as normal. We expect to hear more regarding potential trading investments imminently.”

Supreme Court rules on term-time holiday ban

The Supreme Court has ruled that parents can be prosecuted for taking their children out of school during term time.

In the ruling today, Judge Lady Hale said if parents were able to withdraw children whenever they wanted, it would cause unacceptable disruption.

The Court ruled against Jon Platt, who argues that a £120 fine for taking his children on a trip to Florida during term-time should be waivered.

The Judge said regular attendance had to be in keeping with the rules of the school.

“If one pupil can be taken out whenever it suits the parent, then so can others. Any educational system expects people to keep the rules. Not to do so is unfair to those obedient parents who do keep the rules, whatever the costs or inconvenience to themselves,” said Lady Hale.

She added that unless his daughter was taken out of school for a reasonable cause – for example, illness – Mr Platt would have to pay the fine.

Mr Platt argued that the ruling will mean that every unauthorised absence could be seen as a criminal offence.

Lady Hale said the high court had “clearly been worried about the consequence that a single missed attendance without leave or unavoidable cause would lead to criminal liability. However, there are several answers to this concern”.

“First, there are many examples where a very minor or trivial breach of the law can lead to criminal liability. It is an offence to steal a milk bottle, to drive at 31 mph where the limit is 30 or to fail to declare imported goods which are just over the permitted limit.

“The answer in such cases is a sensible prosecution policy. In some cases, of which this is one, this can involve the use of fixed-penalty notices, which recognise that a person should not have behaved in this way but spare him a criminal conviction.”

Commenting on the judgment, the Prime Minister Theresa May said it was right for schools to decide the balance between attendance and time off.

“It’s right that the individual head teacher has that flexibility to make that decision,” she said.

Bitter neighbour dispute over ‘wooden barricade’ erected around £3.6m home

A wealthy London woman has found herself embroiled in a bitter legal battle with her neighbours after she surrounded part of her £3.6m home with a wooden barricade to ‘protect her privacy’.

Elspeth Pirie, Kensington, erected the giant blockade behind her period home after her neighbours, artist William Milroy and architect Luz Vargas, carried out an extensive reconstruction of their adjacent home.

According to Miss Pirie, the couple’s bold new design featured three large windows which were installed at the rear of their property, and now overlook Miss Pirie’s garden.

The disgruntled pensioner says that she felt ‘forced’ to put up a giant blockade to ‘protect her privacy’ after Mr Milroy and Ms Vargas ‘ignored’ her protests.

In response, an outraged Ms Vargas has launched a legal battle against Miss Pirie, claiming that the oversized hoarding prevents her and her partner from seeing out of their windows, or using their back door.

At Central London County Court, Ms Vargas claimed that the barricade was starving their home of natural light, and creating a new risk of ‘rot and damp’ developing in their home due to trapped moisture.

Meanwhile, Miss Pirie, who is counterclaiming for £50,000, said that her neighbours’ builders carried out “incredibly prolonged and disruptive works” to their property whilst standing in her garden without permission.

She added that the fact that planning permission was not required for Ms Vargas and Mr Milroy’s overlooking windows meant that she, unfairly, never had the opportunity to object to them.

However, at the time the artistic couple were renovating their home, Miss Pirie admitted that she did not contest the works because she “felt she should act in a neighbourly way”.

According to reports, Judge Edward Bailey is due to decide what rights of light and access Ms Vargas and Mr Milroy enjoy at the back of their house, if they are due damages over the hoarding, and whether a light obstruction notice obtained by Ms Pirie should be cancelled.

The dispute continues.

Couple embroiled in bitter boundary dispute over garden hedge

A UK couple have found themselves embroiled in a bitter boundary dispute with their neighbours over the ownership of a garden hedge.

Steve and Sandra Marshall, East Yorkshire, first fell out with their neighbours nearly four years ago when they discovered that part of a hedge which they believed to be theirs had been trimmed without their permission.

An ownership dispute quickly found its way to Court, where Churchill Insurance, representing the Marshall family’s neighbours, argued that the boundary had never belonged to Mr and Mrs Marshall.

The disgruntled couple were issued with an injunction, and a Judge ruled that they must allow boundary surveyors access to their property in order to further examine the disputed boundary.

Mr and Mrs Marshall have appeared in Court several times since, after the duo breached the terms of the injunction on multiple occasions – failing to allow surveyors access to their property.

Mr Marshall said: “The injunction says we have to let the boundary surveyors onto the property, but no way are we going to do that.

“It also says we can’t cut the hedge and have to let somebody else onto our property to cut it twice a year.

“If we are in breach of that and go against it, we will be in contempt of court and could lead to fine or time in jail.”

Churchill insurance have failed to issue a comment on the case.