Analysis
Nirmalathevie Naidoo (Mrs Naidoo) died on 10 February 2016. Her husband, Dr Govindarajaloo Naidoo (Dr Naidoo), had predeceased her on 12 January 1999. They had two daughters and five sons. The first defendant, David Barton (Mr Barton) (formerly known as Ramamurthie Naidoo), was one of their children, and his wife (Mrs Barton) was the second defendant. The claimant was another of their children.
By this claim, the claimant sought:
- (1) an order pronouncing in solemn form for the validity of Mrs Naidoo’s will dated 21 July 2015 (the 2015 will), by which he was appointed sole executor and beneficiary, and rescission of any mutual wills agreement affecting the disposition of her estate (together, the 2015 will claims);
- (2) rescission of the transfer of 25,000 ordinary shares in Choiceclassic Ltd (Choiceclassic) from Mrs Naidoo to Mr and Mrs Barton on 14 April 1992, and rescission of the transfer of 6,000 ordinary shares in the same company from the claimant to Mr Barton on the same date, and consequential orders;
- (3) rescission of a purported agreement between Mrs Naidoo and Mr and Mrs Barton on or about 18 February 2000 (the 2000 agreement) and consequential orders; and
- (4) rescission of three purported settlements made in or about 2000 by Mrs Naidoo (the policy trusts) of three insurance policies (the policies) on the joint lives of Dr and Mrs Naidoo (the policy trusts claims).
As to the 2015 will claims, the mutual wills agreement was a purported agreement made between Dr and Mrs Naidoo in their purported wills dated 25 November 1998. Each of those wills appointed the spouse and Mr Barton as executors, with Mrs Barton as a substitute executor, and provided that the residuary estate should pass to the surviving spouse absolutely, but if that party’s spouse should fail to survive for 28 days then to Mr Barton absolutely, and if he did not survive for 28 days then to Mrs Barton. Each will contained a declaration that it was intended to be mutual with the other. The claimant claimed that the mutual wills agreement was vitiated by a common mistake on the part of Dr and Mrs Naidoo, namely the mistaken belief that entering into a mutual wills agreement would leave the survivor free to alter their will and to make alternative testamentary provision should their intention to leave their estate to Mr Barton change.
As to the 2000 agreement claims, this was an agreement reached ostensibly in order to allow Mrs Naidoo to settle a claim she had pursued against her nephew, Saantha Naidoo. The structure of the 2000 agreement was that Mr and Mrs Barton would advance to Mrs Naidoo a large sum of money, which Mrs Naidoo would in turn pay to Saantha Naidoo, in exchange for the return by the latter of various properties which she alleged he had misappropriated. In exchange for this advance from Mr and Mrs Barton to Mrs Naidoo, Mr and Mrs Barton were to receive what amounted to all of Mrs Naidoo’s assets, including all of the properties which she was to recover in the settlement with Saantha Naidoo, as well Mrs Naidoo’s home. Mr and Mrs Barton would permit her to continue to occupy her home unless they formed the reasonable opinion that they needed to dispose of the property, although she would have given up any right so to occupy it.
The claimant claimed that this agreement was procured by the fraudulent misrepresentation of Mr Barton to Mrs Naidoo that she did not need to read any part of the 2000 agreement other than the signature page, and was only required to sign that in the presence of a witness so that a judge in certain proceedings pursued by Mrs Naidoo against Saantha Naidoo could see a witnessed version of Mrs Naidoo’s signature (the second representation) (a second alleged misrepresentation or fraud had been raised at one time but was not pursued at trial and was formally abandoned in closing).
As to the policy trusts, the claimant put the defendants to proof as to their execution and as to the authenticity of several manuscript additions which purported to restrict the class of beneficial objects to Mr and Mrs Barton and their children and remoter issue.
Alternatively, the claimant contended that, if otherwise valid, the mutual wills agreement, the Choiceclassic transfers, the 2000 agreement and the policy trusts were all procured by the undue influence of Mr Barton. Such undue influence was alleged to have been exercised by Mr Barton directly upon Dr and Mrs Naidoo or, in the case of the Choiceclassic transfer by the claimant, either through Dr and Mrs Naidoo or, alternatively, directly.
In their defence, the defendants denied the validity of the 2015 will and the claimant’s appointment as executor. They asserted the validity of the policy trusts, and that Mr Barton was their sole beneficiary. They denied that the mutual wills agreement or any of the disputed transactions should be set aside on the ground of undue influence. They relied on solicitors’ advice from Pannone LLP to Mrs Naidoo that mutual wills should be drawn up, and the involvement of Addleshaw Goddard in drafting those wills. They relied on the advice of Cobbetts solicitors to Mrs Naidoo in respect of the 2000 agreement and its precursor, a 1999 agreement in extremely similar terms. They raised the defence of laches.
Held:
Choiceclassic claim
Although it was more likely than not that both of Mr Barton’s parents afforded him a degree of trust in his involvement in the family businesses when the Choiceclassic transfer was made, in the sense of letting him make his own decisions, the court considered that Mrs Naidoo relied upon her husband, Dr Naidoo, in relation to these matters, rather than upon Mr Barton, and that Dr Naidoo in turn did not rely upon Mr Barton. As such, the court was not satisfied that there was at the stage of the transfers such a relationship of trust and confidence between Mr Barton and his parents as to lend itself to abuse by Mr Barton, nor that they placed reliance upon him in relation to their affairs.
Therefore, the court rejected the claim that the claimant’s own transfer of these shares arose from his parents’ relationship of trust and confidence with Mr Barton; it was plain from the claimant’s own evidence that he transferred his shares because his parents told him to do so, and not out of any reliance he placed upon Mr Barton or trust in him.
There was also a sufficient explanation for the Choiceclassic transfers by Dr and Mrs Naidoo to Mr Barton, and for their having required the other Choiceclassic transfers to take place. Consideration for the transfer included an agreement on the part of Mr Barton to pay off third-party debts for which they might be personally liable in respect of the company. Accordingly, the claim for the rescission of the Choiceclassic transfers for undue influence was dismissed.
The mutual wills agreement
As to whether there was a mutual wills agreement at all, this was a matter of construction of the terms of the purported agreement. The wills were mirror wills, drafted by the same solicitors, which referred to each other, contained the same provisions and expressly stated that they were mutual. The defendants therefore satisfied the burden of proof as to whether a mutual wills agreement existed.
Although Mrs Naidoo had executed a number of further wills following the mutual wills, that was simply an indication that at the time she thought there was some point in doing so. No inference could be drawn as to whether that was because she was mistaken as to the effect of the mutual wills agreement, or had forgotten about it or its effect, or wanted to conceal it, or for some other reason.
As to whether the mutual wills agreement was based on a common mistake, the court found that it was not. The solicitors responsible for advising on and drafting the wills had expressly advised Mrs Naidoo as to the implications of making the wills in mutual form, and in particular as to how restrictive such wills would be once the first testator had died, upon which Mrs Naidoo had replied that:
‘She said that they were quite certain that they would like the wills to be mutual and that they had no intention whatever of ever altering the provisions of the wills.’
It was therefore clear that Mrs Naidoo knew that the effect of such an agreement would be effectively to prevent them from changing their wills. Although a later letter had explained the effect of the mutuality of the wills in terms that were not altogether clear, this would not have dispelled the correct understanding of the central point, which Mrs Naidoo already had. Accordingly, the mutual wills agreement had not been the subject of a common mistake and the claim that it should be rescinded on this basis would be rejected.
However, the mutual wills agreement would be rescinded on grounds of undue influence. Despite the defendants’ submission to the contrary, the test for vitiation of a mutual wills agreement expressed in a will was the equitable test under Royal Bank of Scotland v Etridge [2001] in respect of contracts generally, and not that applicable to the vitiation of wills for undue influence. A mutual wills agreement was a contract first, before there was any basis for equity to intervene. It was not a testamentary disposition, whether expressed within or outside of the will. There was no possible reason that the test for the validity of such an agreement should depend on whether the agreement was expressed in the will or not, but such a distinction would be required by the defendants’ position. Moreover, any mutual wills agreement did not affect the validity of any subsequent will, or its admissibility to probate; it merely imposed a trust over the estate assets which in effect defeated the later will. This made plain that the probate court was concerned with the validity of a will, rather than implied trusts to which its dispositions may be subject. Therefore, there was no reason that the test of undue influence developed for probate purposes and concerned with the validity of a will should be used for determining whether a contract giving rise to a trust was valid, where an equitable doctrine applicable to contracts and dispositions was already available. Therefore the normal principles of undue influence in contractual matters applied.
By the time the wills were formed and executed, the level of trust reposed in Mr Barton by Dr and Mrs Naidoo had become profound, as had their dependency upon him: Dr Naidoo was extremely unwell and it was understood by all that he did not have long to live. Dr and Mrs Naidoo’s financial affairs were highly unsettled owing to the litigation on which they had by then embarked against Saantha Naidoo. Moreover, by that time Mr Barton had been given full power of attorney over Dr and Mrs Naidoo’s affairs.
The making of the mutual wills in Mr Barton’s favour called for an explanation. Mutual wills were notoriously inflexible and needed to be considered with great care. The effect of the mutual wills was that, as soon as Dr Naidoo had died, Mrs Naidoo became entirely reliant on Mr Barton to look after the family after her own death. Mrs Naidoo understood that this would be their effect (and no doubt Dr Naidoo did too). The only person to benefit from that was Mr Barton himself. The first mention of mutual wills appeared to have come from Mr Barton; and even after Mr Barton had initially raised this prospect, Dr and Mrs Naidoo continued to give instructions in which mutual wills played no part. It had not been until a later stage that their instructions mirrored Mr Barton’s in this regard. The only inference which could be drawn was that Mr Barton was responsible for his parents giving instructions that the wills be mutual, and that, unless a satisfactory explanation could be given, they must have done so as a result of Mr Barton’s abusing their vulnerability and his influence upon them.
There was no satisfactory explanation for the transaction. None of the matters relied upon by the defendants (Mr Barton’s having paid off a directors’ loan for which Dr and Mrs Naidoo had become liable, his provision of assistance to them with the litigation against Saantha Naidoo and financial support he alleged he had given his brothers during their education) came near to an adequate explanation. The benefit that Mr Barton had derived from this arrangement was completely out of proportion to any conceivable benefit to Dr and Mrs Naidoo.
That being the case, the burden of showing that Mrs Naidoo nonetheless acted free of Mr Barton’s undue influence in entering the mutual wills agreement fell on the defendants. They relied on the advice received by Dr and Mrs Naidoo from the firm of Addleshaw Booth. There was, however, no evidence that they received any advice directed to or capable of ensuring that their wish to enter into such an agreement was in the exercise of their own free will, rather than the result of undue influence on the part of Mr Barton. The court found that they had received no such advice, and accordingly that the mutual wills agreement fell to be set aside as a result of that undue influence.
It followed that Mrs Naidoo’s subsequent wills (in particular her will dated 21 July 2015, appointing the claimant as her executor and sole beneficiary) were capable of taking full effect according to their terms.
The 2000 agreement claims
Although there was evidence that Mrs Naidoo had maintained that Mr Barton had asked her to sign a blank page some years ago under the pretence that the court in the proceedings against Saantha Naidoo wanted to see a copy of her signature, given the implausibility of Mrs Naidoo’s account of these matters, and the inability to test the evidence of one of the witnesses to this incident in cross-examination, the court found that the account relied upon by the claimant of how Mrs Naidoo came to sign the 2000 agreement was unreliable and would be rejected.
Mrs Naidoo, when maintaining this account, had not allowed for the fact that she had received legal advice over a long period, about her entering into the 2000 agreement, nor had she explained why Mr Barton should have resorted to obtaining her signature in this way when the 2000 agreement was central to her being able to settle the proceedings against Saantha Naidoo. Therefore, the court rejected the claim that the 2000 agreement should be set aside for fraudulent misrepresentation on the part of Mr Barton.
However, the agreement would be set aside as having been procured by undue influence. At all times from at least 1998, there was a relationship of trust and confidence between Mrs Naidoo and Mr Barton. The 2000 agreement called for an explanation. No one would ordinarily enter into an agreement willingly to transfer to one of their several adult children and his wife what amounted to all of their assets or hope of recovering assets which they had formerly owned, and also give up their right to live in their own home, all for a mere terminable licence and the promise of an allowance, however helpful and trustworthy that child might have been, or might have been expected to remain.
Absent a satisfactory explanation, the only available inference was that Mrs Naidoo entered into the 2000 agreement as the result of undue influence on the part of Mr Barton. The explanation offered by Mr Barton was his successful funding of the proceedings against Saantha Naidoo and their settlement. That was not a satisfactory explanation. While it might have made sense for Mrs Naidoo to agree that Mr Barton should benefit substantially from the assets recovered as a result of the settlement, her giving them all up in exchange for a mere licence to live in her own home, an allowance, and warm words about providing for the other children, was not satisfactorily explained by the litigation funding.
Although Mrs Naidoo had been competently and independently legally advised, such advice was not always enough to free its recipient from the effect of undue influence. The court found that Mrs Naidoo would not have entered into the 2000 agreement if she had been freed from Mr Barton’s undue influence in relation to it by the legal advice she received. As such, the 2000 agreement would be set aside.
The policy trust claims
The 2000 agreement required that the relevant policies be transferred to Mr and/or Mrs Barton and/or at their direction. From this it followed that when the policy trusts were executed, they were executed pursuant to that provision. Since the 2000 agreement was procured by undue influence, and the policy trusts were executed pursuant to that agreement, the latter could not be regarded as having been executed pursuant to any new exercise of free will on the part of Mrs Naidoo, and hence fell to be dealt with in the same way as the 2000 agreement. In any event, at the time of the creation of these trusts, Mrs Naidoo was still subject to the undue influence of Mr Barton; all the more so, because of the effect of the 2000 agreement. Again, therefore, the trusts were procured by undue influence and would accordingly be set aside.
Laches
The defendants pleaded a defence of laches, on the basis that Mrs Naidoo could have sought the relief pursued by this action during her lifetime, and the claimant could have sought such relief at any time following her death; and that the defendants were seriously prejudiced in their ability to defend these proceedings due to the passage of time.
The defendants had not demonstrated any degree of handicap by reason of this delay. They had pointed to the fact that they had been unable to obtain a witness statement from one specific solicitor who had advised Mrs Naidoo as to the suitability of the 2000 agreement. However, there was no evidence that the reason for this solicitor not having provided a witness statement had to do with the passage of time, and this seemed unlikely on the evidence. Apart from this, the defendants had pointed to no other specific evidence which the passage of time had rendered unavailable.
Moreover, delay during the period when a victim was still subject to the undue influence would not bar a claim. It was clear from the contemporaneous documentation that Mrs Naidoo was still afraid of Mr Barton, vulnerable and at his mercy, as a result of the transactions which he had procured by his undue influence over her, up until her death. Accordingly, there was no question of laches during her lifetime.
The defence was not made out in relation to any of the claims.
JUDGMENT HHJ CADWALLADER: Introduction [1] Nirmalathevie Naidoo deceased (hereafter ‘Mrs Naidoo’) died on 10 February 2016. Her husband, Dr Govindarajaloo Ramamurthie Naidoo (‘Dr Naidoo’) died on 12 January 1999. I am told that they had 2 daughters and 5 sons. David Barton (‘Mr Barton’), who was formerly known as Ramamurthie Dasaratha Naidoo) is the second …Continue reading "Naidoo v Barton & anr [2023] WTLR 1047"