Written out of the will

Mr Sandman sued Wilson McKay for dishonest assistance. He alleged that Wilson McKay had knowingly assisted the daughter of, and an attorney for, the testator in producing a will that significantly reduced the benefits that were provided for him in a prior will. Dishonest assistance is an accessory liability cause of action. First there must be principle breach. That was alleged to be by the daughter and/or the attorney. Then there must be a breach by the accessory, in this case alleged to be the dishonest assistance of the lawyer.

The firm applied for defendant summary judgment and strike-out. The High Court refused both. On appeal, the Court of Appeal granted summary judgment but refused strike-out. Key aspects of that decision were:

1. Court of Appeal said the cause of action for dishonest assistance has four components:
   (a) the existence of a trust or fiduciary duty;
   (b) a breach of that trust or fiduciary duty by a trustee or fiduciary that results in loss;
   (c) participation by a defendant third party (a stranger to the trust) by assisting in the breach of trust or fiduciary duty and
   (d) dishonesty on the part of the defendant.
2. On a detailed examination of the evidence it found that the allegation of dishonesty was without merit.
3. It was not necessary for the Plaintiff to be a beneficiary of the trust or of the fiduciary relationship.

The majority¹ agreed with the Court of Appeal on summary judgment but additionally found that the firm had a strong case for strike-out. Key aspects of the judgment are as follows:

1. The test for dishonesty is an objective one, judged against the background of what the defendant subjectively knew. Wilful blindness will suffice. That arises where a defendant strongly suspects a breach of trust but makes a deliberate decision not to enquire. It is necessary that the strength of suspicion makes it dishonest to decide not to make an enquiry.²
2. The Court reviewed what a solicitor should do where she/he doubted capacity, had given full information to ensure the client was aware issues may be raised about capacity, but the client insisted the solicitor followed instructions in relation to the will. It said “the position arguably is that a solicitor, even if he or she does not think a client has capacity, would nevertheless be obliged to prepare and arrange for the execution of the will. The issue of actual capacity would then be decided after the client’s death, on the basis of the evidence including expert medical evidence.”
3. There was no evidence that the solicitor had dishonestly assisted the daughter and/or the attorney to secure the execution of a will which reduced Mr Sandman’s entitlement under the later will.
4. Mr Sandman would need to prove that the daughter and/or the attorney had breached their duties to Mrs Sandman by securing the execution of the later will. There was no pleading and no explanation of how such a breach had occurred. It followed that there was a strong case for strike-out.

The Chief Justice issued a minority decision. She found that the Court could not conclude there had been no dishonesty without a full hearing. However, she concluded that the case should be struck-out because Mr Sandman did not have standing to bring a claim of dishonest assistance as he was not a beneficiary of duties owed by the daughter and/or the attorney to Mrs Sandman. Key aspects of the minority decision are:

1. Contrary to the views of the majority, the Chief Justice found that Mr Sandman could bring a claim in the name of Mrs Sandman.³ However that did not assist Mr Sandman, as such a claim would need to recover the loss to Mrs Sandman not the loss to Mr Sandman.
2. The law is not settled regarding whether Mr Sandman could bring a claim against the firm for duties owed to him as a beneficiary under the earlier will. A claim by a disappointed beneficiary against the lawyer for the testator in negligence has been recognised in certain cases for example White v Jones.⁴ However, that did not assist Mr Sandman as he was not bringing a direct claim against the law firm.
3. What constitutes dishonesty or lack of probity for a dishonest assistance cause of action is contextual. Dishonesty, as applied by the Court of Appeal, is not established on the authorities.⁵
4. Mr Sandman’s claim should be struck out because Mr Sandman was not a beneficiary of any trust or fiduciary duty that could be said to have been breached by the daughter and/or the attorney.⁶

This case is authority for:

1. Summary Judgment is appropriate in circumstances where there are no plausible disputes of fact. In this case Mr Sandman could give no reason why three independent professionals would consider Mrs Sandman had capacity to execute the will when none of them obtained any benefit under the will and had no reason to risk their careers to have the will executed if she lacked capacity.
2. The test for dishonesty is objectively judged against the background of what the defendant subjectively knew. It includes wilful blindness.
3. The Chief Justice’s finding that a disappointed beneficiary under a prior will has no standing for a claim against a lawyer who drafted a later will was not dealt with by the majority. So that finding stands as authority for the proposition that a disappointed beneficiary under an earlier will cannot bring a claim in dishonest assistance for those involved in the drafting of the later will.

Some interesting issues which emerge from this judgment are as follows:

1. What is the duty on a lawyer who suspects that the client lacks capacity but has given all the required warnings, e.g. to obtain a medical certificate, and that the will may be successfully challenged? The majority said that the lawyer should proceed to follow the instructions. The Chief Justice said the lawyer should refuse to act. In our view the majority correctly point out that the lawyer is not a medical expert, so the preferable option is to follow the client’s instructions leaving any affected party to exercise their legal remedies by way of later challenge to capacity.
2. The Chief Justice suggests that a disappointed beneficiary under an earlier will may be able to bring a claim in tort directly against the lawyer drafting a later will. The law is clear that this is possible in situations such as White v Jones. There the interests of the testator and the disappointed beneficiary aligned. However, it is a different proposition where, as occurred in this case, the interests of the disappointed beneficiary and testator are in conflict. If the solicitor owed a duty of care to the beneficiary and the testator that raises significant conflict issues. The rationale for rejecting such duty was fully discussed by the Court of Appeal in Knox v Till⁷ and subsequently by Randerson J in Public Trustee v Till.⁸ In our view a solicitor should not be found to owe a duty of care to a beneficiary of will unless that duty fully aligns with the duty to the client testator.
3. It remains unclear whether the cause of action for dishonest assistance can include a breach of fiduciary duty as well as a breach of trust. This issue is left undecided by the Supreme Court. There is inconsistent authority on this.

[Read the decision here]

1. Glazebrook O’Reagan Ellen France and Arnold JJ
2. Paragraphs [77] and [78]
3. Para [122]
4. White v Jones (1995 2 AC 207 HL)
5. Para [129]
6. Para [171]
7. Knox V Till [1999] 2 NZLR 753
8. Public Trustee v Till [2001] 2 NZLR 508