Mental capacity in its basic form is the ability to make a decision and the loss thereof can happen to any one of us at any time. For the healthy, it may be the result of a sudden illness or injury. For older people, the onset of incapacity may be slower; the result of the progression of an illness such as Alzheimer's disease or just part of the normal aging process.
Understanding incapacity or capacity may seem as complex as the mind itself, but for the purposes of this article the following terms will carry their legal definitions as provided by Stroud's Judicial Dictionary of Words and Phrases. 6th ed. London: Sweet & Maxwell.
- "capacity": an ability or fitness to receive: In law it signifies when a man or body politick is able to give, or take lands, or other things, or to sue actions."
- "legal incapacity: A person may be incapacitated by law or statute from acting in certain circumstances such as being a Minor; in the past being a woman or in event of a mental disease or disorder.
The Mental Health Act ('MHA") provides a mechanism for a person suffering from a mental disease or disorder to be declared legally incapable of acting and under Section 34 of the MHA the court is able to be appointed as custodian of their assets. This is usually subject to submission of an application supported by two medical certificates, certifying the mental disease or disorder that the person is suffering from. The court isn't able to handle the property and affairs of a mentally incapacitated person and would usually do so through a receiver. There is no test or formula set out in the MHA to determine Mental Incapacity.
Giving a Lifetime Gift
The leading case of Re Beaney (Deceased)  1 WLR 770 sets out the test of capacity to make a gift, and states that capacity to make a gift will vary depending on the size, nature and circumstances of the gift.
The degree of understanding required for the making of a valid inter vivos gift was relative to the transaction to be effected. If the subject matter and value of the gift were trivial in relation to the donor's other assets, a low degree of understanding would be sufficient. If however the effect of the gift was to dispose of the donor's only asset of value and to pre-empt the devolution of this estate under his will or on his intestacy, the degree of understanding required was as high as that required for a will and the donor had to understand the claims of all potential donees along with the extent of property to be disposed of.
Making a Will
A person must have soundness of mind, memory and understanding to make a will and therefore must:
- understand the nature and effect of a will
- understand the nature and extent of their property;
- comprehend and appreciate the claims to which they ought to give · effect; and
- be suffering from no disorder of the mind or insane delusion that would result in an unwanted disposition.
In addition to the four part test above, the common law acknowledges that there may be a lucid interval where a person suffering from mental illness may have "will making capacity". When the test has been applied in more recent cases, account has been taken of new knowledge of medical and psychological matters and changing circumstances in society.
The Golden Rule
The substance of the Golden Rule is that when a solicitor is instructed to prepare a will for an aged testator, or for one who has been seriously ill, he should arrange for a medical practitioner first to satisfy himself as to the capacity and understanding of the testator and to make a concurrent record of the examination and findings.
A voluntary gift will be set aside if (i) there exists an act or acts which twist a person's mind so that he acts not of his own will but because of the influence asserted against him (based on the principle that no one should be allowed to retain any benefit arising from his own fraud or wrongful act); and (ii) a relationship between the donor and donee has at or shortly before the execution of the gift been such as to raise a presumption that the donee had influence over the donor. The donee will have the obligation to rebut this presumption. A presumption is triggered when:
- there is a relationship where one acquires influence or ascendancy; and
- the transaction excites suspicion or calls for an explanation.
The court may interfere in these cases, not on the ground that any wrongful act has been committed on the part of the donee, but on public policy grounds. This would usually be applicable where it is impossible to prove a specific wrongful act.
Duties/Responsibilities of Professionals
Persons acting in a professional capacity should tread very carefully when dealing with persons who appear to lack capacity. Professionals must ensure that they are acting in accordance with the terms of the relationships between the parties. In order to determine that a customer may not be acting of his own will, professionals should look for warning signs that may include:-
- a transaction that is unusual;
- an unusual relationship which appears to be influencing a transaction; and
- the making of choices that seem inconsistent with previously held values.
It should be noted however that a major pitfall for professionals is determining what is sufficient evidence to refuse to obey a customer's mandate on the grounds that the client may be suffering from a mental disorder which is not easy to define. Some best practices that professionals can follow include i) maintaining contact with customer ii) documenting aspects of the relationship (such as noting medical conditions), iii) ensuring that customer records are up to date in the event of staff turnover, iv) keeping detailed records and v) recording conversations, where possible.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.