These guidelines are not intended as a general practice note for solicitors who act for clients in the transfer of property by way of gifts, but are intended to assist solicitors whose ‘duties are onerous’1 when acting for the elderly and often vulnerable client in such circumstances.
A Guide to Professional Conduct of Solicitors in Ireland states that a “solicitor should not accept instructions which he suspects have been given by a client under duress or undue influence. Particular care should be taken where a client is elderly or otherwise vulnerable to pressure from others.”2 Solicitors are in a unique position to build in protection for clients in relation to some forms of abuse when advising and drafting documents. A solicitor must identify clearly who the client is, and if it is an elderly person, then it is to that person to whom a solicitor owes a duty of care and must therefore act in their elderly client’s best interest.
A solicitor who is advising an elderly client who proposes to make a substantial gift must ensure that the donor understands:
- The nature of the transaction and that it is a gift and not a loan.
- The consequences of making the gift and that it may reduce the income or opportunities for the donor because of the loss of capital.
- The extent of the gift – the donor should be aware of the scale of what he is giving away in the context of his overall assets. Has he made sufficient provision for his own needs at a later stage?
- The moral obligations that the donor has to other family members; that is, the donor should understand that other relatives who may not benefit from the gift may feel unfairly treated.3 (‘Other relatives’ may include a moral obligation to make provision for an elderly sibling.)
A solicitor should also advise the client of other implications that may arise from the making of a gift. It may be necessary for the client to review, for example, any will that he or she has made or any existing contractual arrangements and, indeed, there may be taxation issues that need to be addressed.
2. Mental capacity
Clearly, a person must have mental capacity to make a gift and this should be established at the time of the gift. A solicitor should consider, ascertain and record whether the client has the necessary capacity to give instructions and enter the particular transaction. The level of capacity to make a gift will depend on the transaction.
In the case of Re Beaney,4 it was established that to “have the requisite mental capacity to dispose of a major proportion of his assets, the donor must have the degree of understanding required … as high as that required by a will”.
The level of understanding required with regard to a gift will vary depending on the value of the gift. Mr Justice Nourse in Re Beaney stated: “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 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, 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.”
Even where the value of an asset is insignificant, a solicitor must ensure that the client’s understanding of a gift is that he or she is making an outright gift and the property is not simply being transferred for convenience. Where a solicitor is satisfied that the client in question has the mental capacity (which may be ascertained with the assistance of medical evidence) to make a gift, the solicitor’s duty does not end there. A solicitor has a duty to ensure that the donor is acting free “from the impairment of the influence on his free will”5 and to ensure that the client is not acting under any undue influence.
3. Undue influence
A solicitor, when instructed by an elderly client to transfer assets, should consider whether the client is making the decision freely or whether the client is not being subjected to pressure or undue influence. It is extremely important that the client is seen alone and free from any potential influence when expressing their wishes and explaining the reason for the proposed transfer of assets.
A solicitor who is receiving instructions from an elderly client for the first time should be ‘put on inquiry’ as to whether the client has already taken advice in the matter. If the client has received such advice, full enquires should be made of the potential client as to why new instructions are now being given to a second solicitor.
The equitable doctrine of undue influence allows a court to declare invalid any transfer of property from a vulnerable person where a dominant party has used the dominant position to bring about the transaction to his benefit that is out of proportion to the consideration provided.
There is a distinction at common law between actual undue influence and presumed undue influence. The courts have been reluctant to list the type of conduct that would amount to actual undue influence, but have held that it arises when one person takes advantage of a weaker party. The general legal principle is that the burden of proving an allegation of undue influence rests upon the person who claims to have been wronged. This is not the case where there is a relationship between the parties, which, as a matter of law, raises the presumption that undue influence has been exercised. Such relationships include that of solicitor and client or where a parent accepts a gift from a child. The presumption of undue influence may not arise where a gift is made by a parent to a child although, in such a case, the issue of an improvident transaction or the lack of provision for future needs does arise. (See under 5 below.) A relevant relationship also arises where one party is legally presumed to repose trust and confidence in the other. In cases of presumed undue influence, it is for the defendant to rebut the inference of undue influence. Accordingly, where the claimant is able to show that he or she had trust or confidence in the wrongdoer and acted to their manifest disadvantage, it is unnecessary to prove actual undue influence.6
The relationships that give rise to the presumption of undue influence are not confined to cases of abuse of trust or confidence. It also includes cases where a vulnerable person has been exploited. The doctrine of presumed undue influence has arisen where there has been “trust and confidence, reliance, dependence or vulnerability on the one hand and ascendancy, domination or control on the other”.7 It has also been held that it is not essential that the transaction should be disadvantageous to the pressurised or influenced person, either in financial terms or in any other way, although in the nature of things, the issue normally only arises where it can be shown that the transaction was disadvantageous either from the outset or as matters turned out.
As is clear from numerous cases, the law has adopted a sternly protective attitude towards certain types of relationship in which one party acquires influence over another who is vulnerable and dependent, and where substantial gifts by the influenced or vulnerable are not normally to be expected.8
4. Solicitor’s duty
The courts have reviewed a solicitor’s duty in cases of undue influence. In Carroll v Carroll ( 4IR), Barron J, in accepting the principles laid down in Powell v Powell ( 1 Ch), stated:
- A solicitor who acts for both parties cannot be independent of the donee in fact, and
- To satisfy the court that the donor was acting independently of any influence from the donee and with the full appreciation of what he was doing, it should be established that the gift was made after the nature and effect of the transaction had been fully explained to the donor by some independent and qualified person.
- The advice must be given with knowledge of all relevant circumstances and must be such as a competent advisor would give if acting solely in the interests of the donor.
Barron J went on to set out that a solicitor does not fulfil his obligation to his client by simply doing what he is asked or instructed to do. A solicitor owes such a person a duty to exercise his professional skill and judgement, and this means that a solicitor must consider what the appropriate advice to his client should be. In other words, a solicitor’s role is more than just drawing up and registering the necessary deeds and documents to effect the making of the gift. A solicitor’s duty is to ensure that the client fully understands the nature, effect, benefits, risks, and foreseeable consequences of making the gift.9
i) Conflict of interest – a solicitor must be aware of the possible conflict of interest if acting for both sides in a transaction involving a gift. While there is no rule that a solicitor should never act for both parties in a transaction where their interests might conflict, a prudent solicitor should ensure, particularly where a vulnerable elderly client is involved, that they have the benefit of independent advice. Appropriate advice (as already stated) also includes advising the client to obtain independent advice. Independent legal advice will not necessarily suffice to rebut the presumption of undue influence. Strong evidence is necessary to rebut it.10 In addition, obtaining the written consent of both parties to a transaction that one solicitor should act for both parties does not absolve a solicitor from ensuring that no conflict of interest exists. Neither should the acceptance by any third party, such as a financial institution, of documentation putting them on notice of the lack of independent advice infer that no conflict exists. Should a conflict arise, a solicitor may only act for one party, otherwise the duty of confidentiality to the other may be jeopardised.
ii) Informed consent – it is not sufficient for a solicitor to show that a client was advised to obtain independent legal advice. If a client requests or consents to a solicitor acting for both parties to a transaction, there is an onus on the solicitor to ensure that the consent of the client is ‘informed consent’. Informed consent means:
- The client knows and understands that there is a potential conflict,
- The client knows and understands that when a solicitor acts for both parties, the solicitor may be compromised in the ability to disclose all information received from one party, and the duty of confidentiality to the second party may be jeopardised,
- The client knows and understands that the solicitor may not be able to advise each client as fully as the solicitor would if the solicitor was not acting for both parties to the transaction.
It has been held, in cases where the presumption of undue influence has arisen, that, as a core minimum, the advice that a solicitor should be expected to give should cover the following matters:
- The nature of the documentation needs to be emphasised, and the practical effects of them if signed,
- The seriousness of the risks involved, including a discussion of the nature of the property involved,
- To point out that the potential donor (client) has a clear choice (a solicitor acting in the best interest of the client should bring the client through the choice options),
- Ascertain the precise wishes of the potential donor (why is the gift being contemplated, and if the client’s objective can be achieved in some other way?).
An understanding of the documentation may be the first step in the exercise of a free choice whether or not to sign it, but it is not the point at which the law of undue influence is directed. A person may be fully informed as to the content of the document and its legal effect and yet be acting under undue influence of another when signing it.11 A solicitor is therefore required to use his or her professional judgement in deciding how far they should go in probing a matter in order to be satisfied that the client is able to make a free and informed decision and is not merely agreeing to do what the wrongdoer wants.12
A solicitor has a duty to be satisfied that the client is free from improper influence and must therefore, first of all, ascertain whether the transaction is one that a client could be sensibly advised to enter into if free from such influence. If a solicitor is not so satisfied, then it is the solicitor’s duty to advise the client not to enter into the transaction or to refuse to act further for the client.
A solicitor who has received instructions and is of the view that the client should not enter into the proposed transaction should set out clearly in writing to the client the reasons for the advice.
5. Future needs/improvident bargain
In advising an elderly client in relation to the gifting of assets, a solicitor should discuss with the client the provision for their future needs and ensure that the potential transaction is not an improvident one from the point of view of the elderly client. This will require a solicitor ascertaining from the client details of the assets (other than the potential gift), the value of those assets, the likely future income of the client and the general family circumstances.
In Carroll v Carroll, a factor that influenced the court to set aside the transaction was the fact that the transaction in question was an improvident one. Both the High and Supreme Courts found that the solicitor in question made no inquiries of Thomas Carroll Senior as to whether he had any other assets apart from the premises that were the subject of the transfer and that the advice given did not take into account all the relevant circumstances. No real consideration was given to the fact that the donor (a frail man in dependent circumstances) was disposing of all his real assets without reserving to himself (by way of a revocation clause or by way of charging the property with his maintenance and support) any protection for his own future.
Similarly, in Hammond v Osborn and others,13 the court held that no consideration was given as to whether the assets the elderly man retained after the making of the gift would be sufficient to satisfy his future needs, which included affording care in the future. Nor was any consideration given to the extremely serious fiscal consequences of the realisation of his investments, which gave rise to a large liability for capital gains tax, which required to be funded from a very limited income. The court found in the case of the Estate of Lily Louisa Morris deceased14 that the transaction in question was manifestly disadvantageous to Mrs Morris, in that she gifted her house and, in the circumstances, it was highly imprudent to do so.
Solicitors have, as was stated at the outset, an onerous duty when acting for vulnerable elderly clients. Each solicitor should ensure that they follow best practice to detect abuse and not facilitate it. Abuse can often be hidden, but a solicitor – in exercising professional skill and judgement and giving careful, considered and appropriate advice – can be instrumental in ensuring that the vulnerable client is not the subject of abuse and exploitation.
- Special Trustees for Great Ormond Street Hospital for Children v Pauline Rushin, 1 W
- Second edition, p9
- See Tolley’s Finance and Law for the Older Client, STEP 2008 edition
-  2 All ER
- Pesticcio v Huet and others  EWCA CIV 372
- See Tolley’s Finance and Law for the Older Client, H1.5
- Royal Bank of Scotland v Etridge (No 2)  4AER
- See Tolley’s Finance and Law for the Older Client
- Royal Bank of Scotland v Etridge
- Banco Exterior International v Mann  1 AER
- Kenyon-Brown v Desmond Banks & Co (1999) 149 NLJ 1832
-  EWCA Civ 885
-  WTLR 1137