The High Court has ruled that retrospective changes to the LGPS exit credits regime were lawful – and gave some helpful guidance around the new discretion to pay an exit credit.
Cockburn CJ determined the legal test for whether someone has capacity to make a will in the case of Banks v Goodfellow in 1870:
“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 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 in disposing of his property and bring about a disposal of it which, if the mind had been sound, would not have been made."
Mummery LJ in the case of Hawes v Burgess added that:
“the freedom of testation (power to make a will) allowed by English law reads that people could make a valid will, even if they are old or infirm or in receipt of help from those who they wish to benefit, and even if the terms of the will are hurtful, are grateful or unfair to those whose legitimate expectations of testamentary benefit are disappointed. The basic legal requirements for the validity are that people are mentally capable of understanding what they are doing when they make that will and that what is in the will truly reflects what they freely wish to be done with their estates on their death."
On 1 October 2007, the Mental Capacity Act 2005 (MCA) came into force and established, under section 3, that for the purposes of the Act, a person only lacks capacity if:
"(1) … he is unable –
(a) to understand the information relevant to the decision,
(b) to retain that information,
(c) to use or weigh that information as part of the process of making the decision, or
(d) to communicate his decision (whether by talking, using sign language or any other means).
(2) A person is not to be regarded as unable to understand the information relevant to a decision if he is able to understand an explanation of it given to him in a way that is appropriate to his circumstances (using simple language, visual aids or any other means).
(3) The fact that a person is able to retain the information relevant to a decision for a short period only does not prevent him from being regarded as able to make the decision.
(4) The information relevant to a decision includes information about the reasonably foreseeable consequences of –
(a) deciding one way or another, or
(b) failing to make the decision.”
For a period of time, it was unclear which test of capacity should prevail – that under the MCA or the test in Banks v Goodfellow. A number of judges and writers sought ways to confirm that the tests completely overlapped. However, on 24 November 2014, Mr N Strauss QC determined that the MCA test was specifically “For the purposes of this Act (section 2(1))”.
There are still, however, areas of uncertainty as exemplified by the case of Simon v Byford.
In that case, the issue on appeal was whether the deceased had testamentary capacity and knew and approved the contents of her will. The trial judge found that she did and upheld a will that she made in December 2005. The deceased had made a number of wills before the disputed will. The trial judge made a finding that the deceased always insisted on treating her children equally. She had tried to be fair in helping her children financially, but thought it was time to review the position in order to "level her children up".
It was common ground that, from 2001, her mental health deteriorated. By December 2005, she was suffering from mild to moderate dementia. However, as is often the case, she had good days and bad days. In her previous will, she had left shares in a company and a Westcliffe flat to her son, Robert. The judge found that it was just possible that her long-term memory enabled her to remember how her previous will benefitted Robert but it was very unlikely. The trial judge found that she was not capable of remembering her reasons for preferring Robert in her previous wills, but, nevertheless, pronounced for the 2005 will. One particular reason for preferring Robert was that, by leaving her shares in the company to him, he would then have control of the company that he effectively ran, rather than all of the children having an equal number of shares and Robert, therefore, lacking the overall control.
Lewison LJ made the following observations concerning the case:
"Capacity depends upon the potential to understand. It is not to be equated with a test of memory…
the judge’s important finding was not that Mrs Simon had forgotten the terms of and reasons for her earlier will. It was that she was capable of accessing and understanding the information; but chose not to. Her decision to benefit her children equally was a perfectly rational decision, which many parents would make even if their children were in different financial circumstances….I do not believe that previous authority goes to the length of requiring an understanding of the collateral consequences of a disposition as opposed to its immediate consequences. Nor do I think it is desirable that the law should go that far…I do not think that any of the authorities required as a condition of testamentary capacity that the testator should understand or remember the extent of anyone else's property…" (paragraphs 40-46).
The Court of Appeal essentially made its decision against the backdrop of the Banks v Goodfellow test of capacity and not the MCA. If the Court had used the MCA test, it is questionable whether Mrs Simon had satisfied the element of understanding “the reasonably foreseeable consequences of deciding one way or another”.
Hopefully, this uncertainty may be resolved, as the Courts have agreed that the question of whether Lord Templeman satisfied the test for capacity when making his will dated 22 August 2008 should be determined. By that will, Lord Templeman left his home, which he had inherited from his second wife, to her children by her first marriage – rather than to his own sons from his first marriage as he had done under his earlier will. Lord Templeman’s sons produced evidence to suggest that the gift to them had previously been discussed and agreed between him and his late second wife.
Whilst accepting that the bar for capacity should not be set too high, this current lacuna warrants a proper review. In both cases, there had been clear reasons for the gifts being made – can it be right to make changes without the testator having to understand the implications of the changes?
Capacity to remember is different from one person to the next, before considering any cognitive issues arising out of a diagnosis of dementia or Alzheimer’s disease. Professor Robert Howard provided an expert’s report – supportive of Lord Templeman’s capacity – stating, among other things, that:
“From the descriptions of Lord Templeman in his clinical records, I would consider that he was probably at the earliest stages of diagnosable Alzheimer's disease in 2008. At this point I would consider that, had he been assessed within a Memory Service, the diagnosis of Alzheimer's disease would have been made and that Lord Templeman would probably have been considered to have been mildly affected by dementia. Because of his extraordinary premorbid intellectual ability, Lord Templeman would have had significant "cognitive reserve". This is a quality, seen in people with superior intelligence and high educational attainment, whereby the patient is able to compensate to some extent for the loss of cognitive function caused by the dementia. Such compensation only occurs at the early stages of dementia and they will eventually reach a point where the loss of cognitive functions consequent upon the progressive neuropathology of the dementia overcomes their cognitive reserve."
This adds another twist to the case, as well as a sense of irony in that it was Lord Templeman, in the case of Kenward v Adams, who formulated what has been referred to as the "golden, if tactless rule"; that the making of a will by an old and infirm testator ought to be witnessed and approved by a medical practitioner who satisfies himself as to the capacity and understanding of the testator and makes a record of his examination and findings. Sadly, for the family, it would seem that Lord Templeman and his advisers did not follow his own advice.
For more information
If you would like more information on matters relating to wills, please contact Alex Elphinston.
1. Banks v Goodfellow (1869-70) L.R.5 Q.B. 549 at 565
2. Hawes v Burgess  EWCA Civ 94 para 14
3. Walker v Badmin  All ER (D) 258
4. Simon v Byford  EWCA Civ 280
5. Goss-Custard & Ors v Templeman & Ors  EWHC 2476 (Ch)
6. Kenward v Adams, The Times 29th November 1975; in re Simpson (1977) S.J. vol 121 p244
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