Legal capacity refers to the ability of a person to make legal decisions, such as signing a contract, making a will, or participating in litigation. To have legal capacity, a person should comprehend the importance of their actions. The level of understanding required for one type of legal decision may differ from another. An individual may be able to make some legal decisions but not others.
When an executor loses capacity, it can happen either gradually or suddenly. An executor who has lost or is losing capacity can pose several risks to beneficiaries, such as financial losses due to risk-taking, poor administration, and increased tension between the beneficiaries. The beneficiaries can minimise the risks if they quickly realise that the executor has lost or is losing capacity.
Executors capacity
Suppose an executor has lost capacity before the Court grants probate. In that case, the beneficiaries can apply to replace the executor with the Court appointing a new executor. Suppose someone is already acting as executor when concerns arise about their capacity. In that case, an application can be submitted to the Court by the beneficiaries to remove the executor from the role, bringing their duties to an end.
Gibbons v Wright [1954] HCA 17 was concerned about whether a contract was ineffective due to the parties’ lack of ‘mental capacity’.
Three women, including Gibbons, became joint tenants of a parcel of land. Later on, the sisters converted the joint tenancy into a tenancy in common through the execution of certain documents. Following their death, Gibbons claimed that the documents were not effective, as the sisters were mentally incapacitated at the time of their execution.
The High Court held that there is no fixed standard of sanity for the transaction, and each party must possess a sound mind to understand the nature of the transaction. The required capacity is relative to the particular transaction. It hinges on the party’s ability to comprehend the nature of the transaction when explained. The High Court was not convinced that the two sisters had the mental capacity to understand the nature of the transaction when they executed the documents and was not satisfied that the two sisters were
‘capable of understanding, if the matter had been explained to them, that by the executing the mortgages … they would be altering the character of their interest in the properties … so that instead of the last survivor … becoming entitled to the whole, each of them would be entitled to a one-third share …’.
Gribbons v Wright [1954] HCA 17; at 7
The Court concluded that the sisters did not possess the ability to comprehend the essence of the agreement, which made them ineligible to form a contract. As a result, the contract could be declared null and void. However, if the sisters did not opt out of the contract during their lifetime, it would remain legally binding and enforceable.
The matter
In Re Glendon [2023] QSC 284, the Court noted
“… it is not a matter of imposing or recognising, a different standard of mental capacity in the evaluation of different transactions. The concept of “mental capacity” must be assessed relative to the nature, terms, purpose and context of the particular transaction.”
Re Glendon [2023] QSC 284 at 7
Ailsa Glendon (“the testatrix “) left her estate to her husband, Keith, and appointed him the sole executor. The deceased’s estate consisted of a 50 per cent interest in two properties owned by Keith and a $14,000 bond with an aged care facility. As little was required to administer the estate, Keith instructed a local solicitor to transfer the properties and retrieve the bond once the Court granted probate.
Keith’s doctor believed that Keith lacked the mental capacity to deal with complex financial decisions such as a property sale or bond transfer. The Court disregarded this evidence as it lacked any foundational detail. However, a different doctor has undertaken the task of assessing Keith and does not believe he can be an executor or deal with complex financial decisions. However, Keith could participate in conversations about such arrangements with the support of his enduring power of attorney to manage those affairs.
The decision
The Court held that the three substantive transactions necessary to administer this estate in connection with the property are straightforward. Additionally, they are entirely consistent with the testatrix’s wishes, which was that all of her property passes to her husband, who is in the unhappy position of simply wanting to achieve his late wife’s wishes, no doubt as expeditiously as possible.
The Court held that when weighing those observations along with giving the apparent weight to the testatrix’s wishes, the simplicity of the transactions necessary to give effect to the estate passing to her nominated executor and beneficiary, favour the grant of probate, notwithstanding the reservations as to his degree of impairment.