Attorneys entitled to give £2.5m inheritance to charity
The continuing attorneys for a wealthy widow with a short life expectancy, who entered into a deed of variation of the will of her late husband by which nearly all of his £2.5m estate went to a charity instead of to his widow, acted within their powers, and although they were in breach of duty in failing to consult the widow's residuary beneficiaries, the equities lay in favour of allowing the deed to stand, a Court of Session judge has held.
Lord Sandison in the Outer House gave his decision in an action formally brought by Gordon Johnstone as executor nominate of the late Elizabeth Kaye against himself as Mrs Kaye's former continuing and welfare attorney, himself as executor nominate of the late Peter Kaye, and Blind Veterans UK. In substance the pursuers were three of Mrs Kaye's residuary beneficiaries. (While Lord Sandison questioned the need to proceed in this way, he recognised that the action was not clearly incompetent and had not been challenged as such.)
Mr Kaye died in May 2017. Mr Johnstone and a Ms Foster, who had since died, were appointed his executors. They were also Mrs Kaye's executors, and when her power of attorney was registered in July 2017, became her attorneys. Mrs Kaye moved into a care home from November 2017, suffering from dementia, and died in March 2019. Having obtained counsel's opinion, Mr Johnstone and Ms Foster, acting both as attorneys and as executors, entered into the deed of variation a few weeks before Mrs Kaye died, when it was known that she did not have long to live.
Had Mrs Kaye predeceased her husband, his estate would have gone to a different charity. Under the deed of variation, instead of receiving the residue of about £2.45m, she received only some moveables of relatively small value. Blind Veterans UK, to which she had made donations totalling about £500 over a period of years, received the rest. It was not disputed that Mrs Kaye was independently wealthy and did not need her husband's money. Her own residuary beneficiaries were nephews and nieces or their representatives.
The power of attorney contained a wide general power (clause 2) to do everything the granter would do for herself "without limitation", followed "without prejudice to these general powers" by a list of particular powers including power (clause 3.17) to sign a deed of variation of any testamentary provision or right of intestacy and generally implement tax planning or other arrangements.
For the pursuer it was argued that the power should be construed in the context of the circumstances at the time it was made. The attorneys had to ensure they were acting within clause 3.17, which required considering whether Mrs Kaye had been in the habit of making donations to the particular charity at the time the power was granted, and what was proportionate in scale to such gifts. In claiming to have taken into account Mr Kaye's interests also, they had acted in a conflict of interest. Further, they had not followed the least restrictive option consistent with the purpose of their intervention, nor had they taken account of the views of Mrs Kaye's nearest relatives, in terms of the duties in s 1 of the Adults with Incapacity (Scotland) Act 2000.
Granting partial declarator in relation to breach of duty but otherwise dismissing the action, Lord Sandison said that the power of attorney provided "in the clearest of terms" the answer to any question about the hierarchy of clauses, and it was not possible to regard it as permitting the execution of deeds of variation only as set out in clause 3.17. (He also questioned why any specific powers were necessary at all, given the breadth of clause 2.) He opined further that Mrs Kaye's donations to the charity were sufficient to constitute a habit, and that clause 3.17 contained no implicit restriction regarding proportionality.
On breach of fiduciary duty, the pursuer had no relevant averments that Mr and Mrs Kaye's interests did not coincide, and "satisfaction that those interests chime with each other does not in itself create a conflict of interest". There were no relevant averments that the attorneys failed to satisfy themselves that their intervention would benefit Mrs Kaye; "a benefit in the sense of having one's apparent wishes while capax fulfilled might well suffice", and averments that the attorneys complied with their responsibilities under the Act and understood that Mrs Kaye did not wish the residue of Mr Kaye's estate to be subject to inheritance tax on her death indicated that they took a view that was reasonably open to them.
As regards "least restrictive option", there was no material difference in the circumstances between effecting the deed of variation and making a codicil to Mrs Kaye's will, even though the width of the power of attorney suggested that it would not have been necessary to apply to the sheriff.
The presumed antipathy of Mrs Kaye's relatives to the proposed deed of variation did not however make it reasonable for her attorneys not to have sought their views: some cogent factor such as estrangement or incapacity would be required for that. "The extent to which any views expressed may be thought to be coloured by self-interest is something that the attorneys are entitled to take into account in coming to what are their own decisions as to whether to proceed with the proposed intervention or some variant thereof; presumed self-interest in the views is not in itself an adequate reason for not seeking them", Lord Sandison commented.
The 2000 Act did not provide for automatic invalidity of any intervention not done in compliance with s 1; the court required to consider the seriousness of the failure and what the consequences of invalidation might be. Here the attorneys and factored in presumed opposition, had concluded that there was a benefit to Mrs Kaye that they wished t proceed with, and it was unlikely that anything that might have been said would have affected their decision. "When one adds to the equation that it is now too late to enter into any alternative deed of variation because of the expiry of the statutory time periods permitting that effectively to be done, it becomes tolerably clear that the equities of the situation point firmly in favour of permitting matters to remain where they stand", he concluded.