Testamentary capacity and undue influence.

Testamentary capacity and undue influence.

Stoneham v Fraser [2020] SC (Bda) 92 Civ. (29 November 2023)

In November 2023 the Supreme Court of Bermuda (Mussenden J) delivered judgment in a case involving testamentary capacity and undue influence in the context of an estates dispute – an area in which we anticipate seeing increased litigation.  In his introduction the learned judge poetically noted:

“The sapphire and azure waters of the North Shore gently lap up against the edges of the shoreline properties along with the fresh sea breeze. Sometimes those waters become a tempestuous sea which along with hurricane force winds rage up onto the land and the people.”

The facts

The late Cedelle Fraser (Mrs. Fraser) was the mother of 5 children, including Lauretta (the plaintiff) and Bertram (the defendant).  She had executed 6 known wills and the dispute was in relation to 2 wills made in 2018 (Mrs. Fraser died in 2019).

In her 2018 wills, Mrs. Fraser gifted two properties to Bertram; she had gifted the same properties in earlier wills to her other children, including Lauretta.  Lauretta applied to have the two 2018 wills set aside on the basis that (1) Mrs. Fraser did not have the mental capacity to make the wills and (2) Bertram had exercised undue influence over Mrs. Fraser at the time the wills were made.  Lauretta also sought (3) title to one of the properties on the basis of promissory and/or proprietary estoppel: she claimed that Mrs. Fraser had promised the property to her and in reliance on that promise she had made financial investments into the property to her detriment.

The trial took place over 7 days in early 2023.  The court examined extensive documentary evidence and heard from 11 witnesses of fact together with expert psychiatric witnesses on both sides.

Issue (1) – Did Mrs. Fraser have testamentary capacity to execute the 2018 wills?

The Court confirmed that the test for whether a testator has sufficient testamentary capacity to execute a will is that set out in Banks v Goodfellow [1861-1873] All ER Rep. 74 per Cockburn CJ:

“It is essential to the exercise of such a power that a testator shall understand the nature of the act and its effects; shall understand the extent of the property of which he is disposing; shall be able to comprehend and appreciate the claims to which he ought to give effect; and with a view to the latter object that no disorder of the mind shall poison his affections, pervert his sense of right, or prevent the exercise of his natural faculties; that no insane delusion shall influence his will on disposing of his property, and bring about a disposal of it which would not have been made otherwise.”

The legal principle applicable to the burden of proof in such cases was summarised in Ledger v Wooton [2007] EWHC 90 as follows:

“(a) the burden is on the propounder of the will to establish capacity; (b) this remains the case even if the propounder has already obtained a grant in common form; (c) where a will is duly executed and appears rational on its face, then the court will presume capacity; (d) an evidential burden then lies on the objector to raise a real doubt about capacity; (e) once a real doubt arises there is a positive burden on the propounder to establish capacity.”

The Court noted that the “Golden Rule” for legal practitioners drafting wills for an elderly or ill testator is to obtain the evidence of a suitably qualified medical practitioner on the testator’s capacity.  However, the Court must answer the following questions in the affirmative to be satisfied that the testator had the requisite mental capacity at the time the wills were executed:

a. Did the testator understand the effect of her wishes being carried out on her death?

b. Did the testator understand the extent of the property she was disposing of?

c. Did the testator understand the nature of the claims upon her estate? and

d. Did the testator have a rational basis for making provision for only one of her children (Bertram) whilst excluding her other four children?

If a plaintiff establishes that any of the above factors is missing, that is enough to establish lack of mental capacity.  In this case, the Court was satisfied that Mrs. Fraser had dementia in 2018 when she made the wills.

Issue (2) – did Bertram exercise undue influence over Mrs. Fraser when she executed the 2018 wills?

The modern application of the equitable principle of undue influence is found in Royal Bank of Scotland Plc v Etridge (No. 2) [2002] 2 A.C. 773 HL (cited with approval in Wong ,Wen- Young v Grand View Private Trust Company Limited et al [2022] SC (Bda) 38 44 Com (22 June 2022)).  Per Lord Clyde:

“[at] the end of the day, after trial, there will either be proof of undue influence or that proof will fail and it will be found that there was no undue influence. In the former case, whatever the relationship of the parties and however the influence was exerted, there will be found to have been an actual case of undue influence.”

The doctrine of actual undue influence is often split into two strands: (i) improper threats or improper inducement; and or (ii) where the nature of the relationship between the parties is such as to impose a “duty to behave to the vulnerable party with candor and fairness. If the stronger party then acts in breach of their duty, the transaction can be set aside for undue influence”.

The Judge found that Bertram had exercised undue influence over Mrs. Fraser to procure the execution of her wills for the factual reasons set out in the Court’s detailed judgment.

Issue (3) – does the principle of promissory or proprietary estoppel apply to the circumstances of the case?

The equitable doctrine of promissory estoppel requires three main elements to be proved:

a. A representation or assurance made to the plaintiff by the [deceased];

b. Reliance by the plaintiff on that representation or assurance; and

c. Detriment to the plaintiff in consequence of his reasonable reliance.

Although the Court set aside the 2018 wills for lack of mental capacity and undue influence, the learned Judge was not satisfied on the facts that a claim in either proprietary or promissory estoppel was made out.

The key takeaway point for estate practitioners is to follow the “Golden Rule” when drafting a will where there might be any question regarding the client’s mental capacity, and have the issue confirmed (or otherwise) and recorded by a specialist clinician.