Sutton v Sutton and Another
| Jurisdiction | England & Wales |
| Judge | Mr Christopher Nugee QC |
| Judgment Date | 29 October 2009 |
| Neutral Citation | [2009] EWHC 2576 (Ch) |
| Docket Number | Case No: HC 08 C 00329 |
| Court | Chancery Division |
| Date | 29 October 2009 |
[2009] EWHC 2576 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Christopher Nugee QC
Sitting as a Deputy Judge of the High Court
Case No: HC 08 C 00329
Philip Jenkins (instructed by Saulet Ashworth Llp) for the Claimant
Richard Dew (instructed by Donnelly & Elliott Llp) for the Defendants
Hearing date: 6 October 2009
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic
……………………………………….
Introduction
The Claimant, Mrs Rosalie Sutton, (“Mrs Sutton”) is the widow of Mr Norman Edward Sutton (“Mr Sutton”) who died intestate on 12 November 2005 aged 81. She is also the administratrix of his estate. In this action she sues to recover for the estate a freehold property known as Edrosa, a bungalow in Tangmere, West Sussex, which was their matrimonial home and where she still lives (“Edrosa”). In 1997 Mr Sutton executed a transfer of Edrosa to their son Mark Sutton (the First Defendant); and in 2002 Mark Sutton transferred it into the joint names of himself and his wife Susan Sutton (the Second Defendant) as trustees of a trust known as the Edrosa Settlement. Mark and Susan Sutton are the current registered proprietors of Edrosa.
The basis for the claim is that Mr Sutton lacked capacity at the time of making the transfer in 1997 and that the transfer was therefore void. The Defendants initially defended the claim, putting the Claimant to proof of the lack of capacity (although advancing no positive case to the contrary), asserting that the lack of capacity would have made the transfer voidable rather than void, and advancing reasons why it should not be set aside. They have now however agreed a conditional compromise of the action with the Claimant under which they have agreed in effect not to contest the relief sought by the Claimant in return for a charge in agreed terms in favour of themselves (as trustees of the Edrosa Settlement). This is however subject to the Court being willing to grant a declaration that the transfer by Mr Sutton was void, or should be set aside, for lack of capacity.
This means that the case comes before me in an unusual form. Mr Jenkins, who appeared for Mrs Sutton, and Mr Dew, who appeared for Mark and Susan Sutton, joined forces in asking me to find that Mr Sutton lacked capacity at the time of executing the transfer in 1997 and to hold that as a consequence the transfer was void; and both invited me to grant a declaration to that effect. There was therefore no live issue between them: none of the witnesses whose statements were before the Court was cross-examined or called to give oral evidence, and there was no adversarial argument either on the facts, or on the law (although counsel helpfully drew my attention to certain authorities which might be against them on the law).
In these circumstances there are three issues for me to resolve:
i) Did Mr Sutton have capacity to execute the transfer ?
ii) If he did not, is the effect of that to make the transfer void or voidable ?
iii) Should the Court grant the declaration as asked ?
Facts
The basic facts can be summarised quite briefly. Mr Sutton was born in 1923. He had a succession of jobs in electronics, ending up owning his own business. In summer 1997 he was living at Edrosa with his wife; I am not told when they moved there but I am told that it was their matrimonial home for many years. It was registered at HM Land Registry in his sole name. Mr Sutton was then 73. He and his wife had one son, Mark, who was born in 1959 and was then 37. On 31 August 1997 (a Sunday), they executed a form of transfer of Edrosa to Mark (“the 1997 transfer”). There was no monetary consideration, the transfer being in consideration of “our natural love and affection”. As drawn up, the transfer was expressed to be a transfer by both Mr and Mrs Sutton and each signed it, their signatures being witnessed in each case by a neighbour, D M Tsang.
When the 1997 transfer was lodged at HM Land Registry, it was returned by the Registry on the basis that the property was registered in Mr Sutton's name alone and the transfer should not have been in joint names. The transfer was then altered by striking through both the reference to Mrs Sutton and her signature, the deletion in each case being signed by Mr Sutton. The evidence does not deal with any precision when this took place although Mark Sutton says that his mother called to tell him that the Registry had returned the form “several weeks later” (than the original execution).
It appears that the amended transfer was then re-lodged and in due course Mark Sutton registered as proprietor. On 22 November 2002 he executed a further transfer of Edrosa to himself and his wife Susan. This was expressed to be in consideration of £50,000. It is common ground on the pleadings that the transfer was to Mark and Susan Sutton as trustees of the Edrosa Settlement, a discretionary trust established by them earlier that day, and that the £50,000 was lent by Mark to the trustees.
Despite the 1997 transfer, Mr and Mrs Sutton continued to live in Edrosa. As already mentioned Mr Sutton died intestate on 12 November 2005. Mrs Sutton was granted letters of administration to his estate on 30 November 2007. She continues to live there, I am told currently under a licence.
I have no formal evidence of value but I am told that the value of Edrosa at the time of Mr Sutton's death was £325,000 and that he then owned investments worth around £116,000; it is thought that Edrosa is now worth about £400,000. I have no evidence as to the value of Edrosa in 1997, or of what investments Mr Sutton then had or their value, but I am prepared to infer that in 1997 Edrosa was his principal, although not only, asset of any value.
The impetus for the 1997 transfer appears to have come from Mrs Sutton's brother-in-law who thought that it would save inheritance tax. If so, it would seem that he was badly mistaken: I was not addressed at any length on the inheritance tax consequences but I assume that the 1997 transfer (if valid) would have been a gift with a reservation of benefit, and therefore ineffective to take the value of the property out of Mr Sutton's estate. That no doubt explains why both parties now consider it in their interest to have the transfer declared void. I am told that there are also capital gains tax implications; again, I have not been given any details of this, but it appears that the problem is or may be that if the 1997 transfer were valid, Mark Sutton would have acquired the property with a base cost of its 1997 value whereas if the transfer had not been made, Mr Sutton would have continued to enjoy principal private residence relief and there would have been a CGT-free uplift to its value at the date of his death. And the settlement of Edrosa on the trustees would no doubt have been a chargeable disposition, although I do not know whether any election was made for relief.
Did Mr Sutton lack capacity ?
With that introduction I can now consider the question whether Mr Sutton lacked capacity at the time of executing the 1997 transfer. There is no dispute that the question whether a person giving away property has the capacity to do so is to be determined by the principles set out by Mr Martin Nourse QC (as he then was) in Re Beaney decd [1978] 1 WLR 770. That was another case where the deceased had given away her house (her only asset of value) and after her death the transaction was impeached on the grounds that she lacked capacity. Having said that there appeared to be no clear authority on the degree or extent of understanding required for the validity of a voluntary disposition by deed, and having discussed the rival submissions, he gave his views as follows (at 774D-F):
“In the circumstances, it seems to me that the law is this. The degree or extent of understanding required in respect of any instrument is relative to the particular transaction which it is to effect. In the case of a will the degree required is always high. In the case of a contract, a deed made for consideration or a gift inter vivos, whether by deed or otherwise, the degree required varies with the circumstances of the transaction. Thus, at one extreme, if the subject matter and value of a gift are trivial in relation to the donor's other assets a low degree of understanding will suffice. But, at the other extreme, if its effect is to dispose of the donor's only asset of value and thus, for practical purposes, to pre-empt the devolution of his estate under his will or on his intestacy, then the degree of understanding required is as high as that required for a will, and the donor must understand the claims of all potential donees and the extent of the property to be disposed of.”
In the present case, it is unlikely that Edrosa was Mr Sutton's only asset of value in 1997 because it is probable that he already owned investments of some value, but as I have already said I am prepared to infer that it was his principal asset. I therefore proceed on the basis that the degree of understanding that he had to have for the gift to be valid was a high one and that he had to be capable of understanding not only the general nature of the transaction but also the claims of other potential donees.
The evidence as to Mr Sutton's mental capacity can be divided into three parts: evidence as to the circumstances of the transaction itself; evidence of members of the family, in particular of a number of incidents of forgetfulness...
To continue reading
Request your trial
-
Mrs Jagir Kaur Singh (by her litigation friend, Maurice Hackenbroch) v Anthony Daljinder Singh and Another
...health and the relationship with the first and second defendants which I have already mentioned in relation to the first transfer. 19 In Sutton v Sutton [2009] EWHC 2576 (Ch) Mr Christopher Nugee QC (as he then was), sitting as a Deputy Judge of the Chancery Division, considered whether the......
-
Re Smith (Deceased); Kicks and another v Leigh
...not to be equated with an absence of testamentary capacity. The deceased's memory was not working well, but she knew her own mind. Sutton v Sutton [2009] EWHC 2576 48 In this case, Christopher Nugee QC (as he then was) declared an inter vivos transfer of property by a father to his son to......
-
Corinne Blythe v Stephanie Blythe
...is void or voidable, see the discussion of the authorities by Mr Christopher Nugee QC (as he then was) in the case of Sutton v Sutton [2009] EWHC 2576. If voidable Stephanie, as Roland's executor, could potentially acquiesce in or affirm the Transfer. Documentary Evidence of Roland's Financ......
-
Fung Oi Ha v Fung Pui On And Another
...the gift can be avoided. On the contrary, Deputy High Court Judge Nugee QC expressly rejected such a suggestion in Sutton v Sutton [2009] EWHC 2576 (Ch) at [40]. The editors of Chitty on Contracts (32nd Ed), Volume 1 similarly rejected such a proposition in 126. In any event, if Father had ......