Assessing Testamentary Capacity at Time of Will: New “Rules of Thumb” for Solicitors – Supreme Court NSW

In Ryan v Dalton (31 July 2017) Justice Kunc provided a “postscript” on “questions of capacity” “proposing some basic rules of thumb” as “basic precautions” particularly in relation to “anyone:

(a) over 70;
(b) being cared for by someone;
(c) who resides in a nursing home or similar facility; or
(d) about whom for any other reason the solicitor might have concern about capacity.”

His Honour noted that

“the effort involved in paying attention to questions of capacity at the time instructions for a will are taken and the will is executed (including, where necessary, obtaining an assessment of the client where it is thought one is called for) pales into insignificance with the expense, delay and anxiety caused by litigation after the testator’s death”.

These “rules of thumb” may be “offered only as suggested basic precautions” but will inevitably be argued at some stage as providing a clear baseline for assessing whether a solicitor met their standard of reasonable care in the execution of a will or other similar transaction.

The requirement for an interview without other people and using open rather than leading questioning also provides clear guidance for experts in the assessment process.

In summary, if in doubt spend a small amount of money now to have an independent assessment of capacity to save running a major trial 10 years later.

Click here for details of an upcoming Law Society and Expert Experts joint Seminar.

The “Postscript” is set out in full below.

Estate of Ryan [2017] NSWSC 1007 (31 July 2017)

Postscript – the need for continuing legal education on questions of capacity

101. The demographic reality of an aging population means that the likelihood of challenges to wills on the ground of testamentary capacity is increasing. Two recent government reports on elder abuse have made recommendations in relation to the role of lawyers and legal education. Those matters, when also considered in the light of recent decisions of this Court on the question of testamentary capacity, suggest that it is appropriate to conclude this judgment with some observations divorced from the personalities and facts of this particular case.

102. The New South Wales Legislative Council’s Report on Elder Abuse in New South Wales (24 June 2016) included this recommendation:

“Recommendation 8

That the NSW Government liaise with Law Society of New South Wales to request the Society include a unit on the assessment of mental capacity in respect of substitute decision making, wills and property transactions in its Continuing Professional Development Program for legal practitioners.”

103. More recently, the final report of the Australian Law Reform Commission “Elder Abuse – a National Legal Response” (ALRC Report 131, May 2017), included this recommendation:

Recommendation 8-1 The Law Council of Australia, together with state and territory law societies, should develop best practice guidelines for legal practitioners in relation to the preparation and execution of wills and other advance planning documents to ensure they provide thorough coverage of matters such as:

(a) elder abuse in probate matters;
(b) common risk factors associated with undue influence;
(c) the importance of taking detailed instructions from the person alone;
(d) the need to keep detailed file notes and make inquiries regarding previous wills and advance planning documents; and
(e) the importance of ensuring that the person has ‘testamentary capacity’ — understanding the nature of the document and knowing and approving of its contents, particularly in circumstances where an unrelated person benefits.”

104. The Court notes that the NSW Law Society’s publication When a Client’s Capacity is in Doubt: A Practical Guide for Solicitors was reissued in 2016.

105. Assistance in relation to making a will remains one of the most likely reasons for Australians to seek the assistance of a solicitor. The demographic trend to which I have referred suggests that a good understanding of the issues surrounding mental capacity is an essential skill for any solicitor who holds himself or herself out as competent to provide legal services to natural persons. It is to be hoped that the recommendations of the two recent reports, will be acted upon as quickly as possible.

106. Questions of testamentary capacity are necessarily fact sensitive. No rule or procedure will cover every case to avoid the possibility of litigation. Nevertheless, the effort involved in paying attention to questions of capacity at the time instructions for a will are taken and the will is executed (including, where necessary, obtaining an assessment of the client where it is thought one is called for) pales into insignificance with the expense, delay and anxiety caused by litigation after the testator’s death. Bearing that in mind, and without wishing in any way to derogate from, for example, the desirability of all solicitors being familiar with the guidelines, the recent experience of the Court suggests that proposing some basic rules of thumb (which, as such, are necessarily arbitrary) may be of assistance.

107. It seems to me that the following is at least a starting point for dealing with this increasingly prevalent issue:

(1) The client should always be interviewed alone. If an interpreter is required, ideally the interpreter should not be a family member or proposed beneficiary.

(2) A solicitor should always consider capacity and the possibility of undue influence, if only to dismiss it in most cases.

(3) In all cases instructions should be sought by non-leading questions such as: Who are your family members? What are your assets? To whom do you want to leave your assets? Why have you chosen to do it that way? The questions and answers should be carefully recorded in a file note.

(4) In case of anyone:

(a) over 70
(b) being cared for by someone;
(c) who resides in a nursing home or similar facility; or
(d) about whom for any other reason the solicitor might have concern about capacity,

the solicitor should ask the client and their carer or a care manager in the home or facility whether there is any reason to be concerned about capacity including as a result of any diagnosis, behaviour, medication or the like. Again, full file notes should be kept recording the information which the solicitor obtained, and from whom, in answer to such inquiries.

(5) Where there is any doubt about a client’s capacity, then the process set out in sub-paragraph (3) above should be repeated when presenting the draft will to the client for execution. The practice of simply reading the provisions to a client and seeking his or her assent should be avoided.

108. I emphasise that the foregoing is offered only as suggested basic precautions which may identify problems which need to be addressed. In many cases which do come before the Court the evidence of the solicitor will be critical. For that reason, it is essential that solicitors make full, contemporaneous file notes of their attendances on the client and any other persons and retain those file notes indefinitely.”

SEMINARS AND REPORTS

NSW Law Society & Expert Experts seminar on Testamentary Capacity 12 September 2017:

Dealing with clients with (possible) impaired mental capacity: with Therese Catazariti of 13 Wentworth, Professor Ian Coyle and Alicia Tyler psychologists.

Expert Experts – Testamentary Capacity Assessments

Bruce Smith

Questions or feedback welcome to:

BSmith@expertexperts.com.au or brucesmith@jackshand.com.au

This is not legal advice. I regularly conduct discussion groups on discrete issues in different areas of expert evidence to promote thinking amongst expert witnesses. It’s been suggested my synopses might be of interest to others. If they are I’ll post more.
Seminars: We regularly present seminars on different areas of expert evidence for the Law Society of NSW, sometimes with experts in those fields. I am open to presenting these seminars in-house to larger firms and insurers for whom sending large numbers of people to the Law Society seminars is not practical.

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TPD: Reasonably Accessible Labour Markets

lma picThe assessment of the reasonably accessible labour market arises in employability assessments in TPD, as well as in earning capacity assessments at common law or in workers compensation.

However, because the substantive legal principles and issues for determination in TPD are different to those at common law the application of the vocational assessor’s expertise to the TPD problem must also be different for the opinion to be relevant, reliable and admissible.  Merely adopting the standard rehabilitation style report is clearly inadequate in a TPD case. (see Justice’s Ball’s interlocutory decision rejecting such a report in Erzurumlu v Kellogg Superannuation).

While a reasonably accessible labour market test always applies in common law cases it may apply in TPD cases.

“Unable to”: The issue is highlighted by Hannover Life Re of Australia v Cesario Collella [2014] VSCA 205 at [34].   The policy term was “unable to do any work”.  Overturning the Judgment at first instance the Victorian Court of Appeal found that imposing a test of “the existence of work ‘which is reasonably accessible  in the market place and in an area in which it could be expected an insured in the position of the claimant could reasonably apply’ … went too far”.

The legal test was “unable to” which did not require a job in a reasonably accessible labour market.

This means that the question of a reasonably accessible labour market is not necessarily inherent to the definition of TPD, as it is at common law, but may or may not be a requirement depending on the terms of each policy.  It also suggests that the specific labour market factors which must be considered may vary from policy to policy.

“Unlikely ever to”: The Courts generally apply a reasonably accessible labour market test to “unlikely ever to” definitions.  However, unlike common law cases in which the reasons for applying a reasonably accessible labour market test are clear, in many TPD cases it is just assumed.

The Courts have (apparently) adopted and applied the common law view by way of an implicit argument that a reasonable interpretation of the policy does not envisage the member would be required to move address to seek work.  The member’s current address and the reasonably accessible labour market are therefore factors relevant to the “likelihood” of the member ever working again.

While the above interpretation is clearly open, it is not clear that it has been fully tested, and nor is it clear that it is generally appropriate to apply that test to “unlikely ever to” policies without closer analysis (given that it is not necessarily an inherent criteria of a TPD definition per Collella).

For example, it may be open to argue that a reasonable commercial interpretation of a TPD contract would be to extend the concept of assumed motivation to exercise residual capacity to include an assumed motivation to move in order to get work.  This is something that people do across Australia every day and many statutory compensation schemes now make this assumption.  If this reflects current views of what is reasonable that is arguably relevant to the interpretation of a TPD policy.

Also highlighting this question is the issue of which address to use when a member moves after the date for assessment?  Does the “likelihood” relate to the labour market accessible from:

(i) Their address at the date for assessment?

(ii) The address the member has moved to?

(iii) Either address ( ie would the likelihood of work in either labour market exclude them from the TPD definition?

Further, how does this evidence that the member chose to move sit with an underlying assumption that you need to review a specific reasonably accessible labour market because people don’t move, and what if they’ve moved to an area of lower likelihood of employment?

A lot of interesting questions to consider, and hopefully see determined by the Courts, regarding this important but often misunderstand and unexplored expert issue in employability and TPD.

Bruce Smith

This is not legal advice.  I regularly present short seminars on very discrete issues in different areas of expert evidence to promote thinking amongst expert witnesses in those areas.  It’s been suggested my short written summaries might be of interested to others.  If they are I’ll post more.