ALEXANDER LLOYD MATOSSIAN AS EXECUTOR NOMINATE OF THE LATE AUDREY MATOSSIAN AGAINST (FIRST) BERJ VARTAN JOHN MATOSSIAN; AND (SECOND) RICHARD HAIG MATOSSIAN
OUTER HOUSE, COURT OF SESSION
[2016] CSOH 21
A193/12
OPINION OF LORD UIST
In the cause
ALEXANDER LLOYD MATOSSIAN as Executor‑Nominate of the late AUDREY MATOSSIAN
Pursuer;
against
(FIRST) BERJ VARTAN JOHN MATOSSIAN; and (SECOND) RICHARD HAIG MATOSSIAN
Defenders:
Pursuer: Simpson QC; Drummond Miller LLP (for Watson & Lyall Bowie, Coupar Angus)
Defender: Coutts; Urquharts
28 January 2016
Introduction
[1] The late Mrs Audrey Matossian was born on 25 September 1927 and died on 27 December 2010. She was divorced at the time of her death. Her previous husband had predeceased her in 2003. She had three sons: Berj (also known as John) born on 29 February 1955; Richard, born on 20 February 1958; and Alexander (known as Alex) born on 11 May 1960. Berj lives in Johnston, Renfrewshire, Richard in Forfar and Alex in Blairgowrie. At all material times Alex did not get on with either of his brothers and neither of them got on with him.
[2] In or about November 2006 Mrs Matossian owned three heritable properties, namely, the adjoining houses at 99 and 101 Drumover Drive, Glasgow (99 and 101) and a flat at 592 Tollcross Road, Glasgow (592). She lived in 101 and had done so for many years. On 25 April 2007 she executed, in the presence of a solicitor (Mr Gair Couston, a partner in the firm Shiells in Brechin) a disposition of 99 to Richard, a disposition of 101 to Berj and a deed of gift conveying her whole right, title and interest in 592 to Berj. On 4 May 2007 she executed a will (the will) in the presence of a different solicitor (Mr Kevin Lancaster, a partner in the firm Watson Lyall Bowie in Coupar Angus) in terms of which she appointed Alex as her sole executor-nominate and bequeathed 101 to Alex, 99 to Berj and 592 to Richard. In this action Alex, suing in his capacity as executor nominate under the will, seeks reduction of the two dispositions and the deed of gift on the ground that they were impetrated by means of facility and circumvention and also by undue influence exercised over Mrs Matossian by Berj and Richard. The broad proposition advanced on his behalf is that by virtue of the three transactions of 25 April 2007 Mrs Matossian gave away basically all her assets in contradiction of a contemporaneous will, to Berj and Richard for no return except a capital gains tax liability at a time when she was clearly seriously ill and without the assistance of independent advice. In a counterclaim Berj and Richard seek decree for payment to them by Alex of sums of money which they have spent on 101 and 99 respectively since April 2007 on the basis of unjust enrichment. The validity of the will is not challenged by them.
[3] Mrs Matossian purchased 99 on 12 November 1964 and 101 on 27 August 1969 with money inherited from her late father. On 15 May 1972 she inherited the detached property known as Estrada in Blairgowrie from her late father. On 7 October 2002 a disposition (which had been prepared by Alex himself) by her to Alex of Estrada was recorded in the General Register of Sasines. The validity of that disposition is not challenged by Berj and Richard.
Facility and circumvention
[4] The essential elements of facility and circumvention are (i) weakness of mind on the part of the grantor of the deed under challenge; (ii) lesion to the grantor by means of the deed; and (iii) circumvention practised by the beneficiary of the deed (McBryde on Contract, (3rd Ed, 2007) at pps 433-437, paras 16-12 to 16-21). The presence of the third may be inferred from proof of the first two, or the first two combined with circumstantial evidence.
[5] In Clunie v Stirling (1854) 17D 15 a former army officer was persuaded into purchasing an annuity on his own life and after his death his executor raised an action against the person who had given him the annuity on the ground of facility and circumvention. The jury having found in favour of the pursuer, the defender reclaimed on the basis that the verdict was contrary to the evidence. In the course of his opinion the Lord Justice‑Clerk (Hope) stated at p 17:
“[The issue of facility and circumvention] is intended to embrace any case in which, where a person has become easily imposed upon, or ready to yield his assent, it may be upon a particular subject, whether from old age or actual disease, or the effects of the same on the nerves, leaving an unnatural anxiety and nervousness on any particular subject, especially the state of his future income, when he has fallen into a helpless situation, another leads him on into a highly disadvantageous bargain, to his own benefit, or that of the party for whom he is acting, and who adopts the same. The actual mode or particular acts of circumvention may not be discoverable or easily proved. But the result may demonstrate that the party was really circumvented in the sense of the issue, when he was led into the transaction under challenge; and then the nature of that transaction, the mode in which, and the party by whom, it was carried through, and the object apparent on the face of it, for which, if palpably disadvantageous, it was huddled up without proper inquiry, and without the individual receiving the aid he ought to have received, all bear on the jury question, whether the party had been circumvented.”
In that case the court did not regard it as outwith the scope of the jury’s power to find in favour of the pursuer notwithstanding the absence of evidence of any specific acts of circumvention because the deceased’s mind was so pliable and the detriment from the transaction so clear. Lord Justice‑Clerk hope said at p 18:
“Under the second issue, it was contended that we must find some positive fact proved which amounts to a distinct act or piece of circumvention; some trick, some particular practising on the mind of the party at a particular time – some details, in short, as to the acts and practices which the general term circumvention includes; and that if one cannot lay one’s hand on distinct instances, detected and proved, of particular acts and practices amounting to circumvention, there is no ground for supporting the verdict. If such a view were to be taken under the second issue, and of the mode in which alone it was competent for a jury to arrive at a verdict on that issue, I believe nineteen out of twenty of the cases in which deeds have been set aside under this issue must have failed. The correct view of the matter is quite different. It is seldom possible to ascertain the particular acts or practices by which either a facile old man, or a person whose power of judging of the fitness and propriety of entering into particular arrangements as to his affairs has been weakened by the nervous apprehension and impatience and excited feelings which a very bad shock of paralysis and great bleeding produce, has been induced to enter into disadvantageous transactions, to his own great prejudice. What passes is commonly with some one party, either the defender or an agent, and is either unknown, or if such party is examined, all practices may be positively denied, which raises a question as to his veracity for the jury. But if the facts satisfy the jury that there was in such party a motive to mislead and induce him to enter into the transaction, either for his own benefit or for the benefit of someone whose interests he was promoting, and that only under persuasion and untrue representations, acting on a mind facile or nervously anxious, from disease, on the subject, could have brought about the result, then it is for the jury to say whether they draw from the whole case the inference of circumvention. Hence that general ground of objection to the verdict is unsound.”
[6] In Munro v Strain (1874) 1R 1036 a man made a will leaving his property to establish an orphanage. A priest friend of his who wished him to leave his estate to his grandchildren or limit the orphanage to taking in Catholic children persuaded him to grant a deed revoking his existing will and directing that his property should be divided in accordance with a deed to be granted by him at a future date, but the man died without granting any further deed. A jury found facility and circumvention established and the Second Division refused a motion for a new trial. Lord Neaves said at pps 1044-5:
“The issue undoubtedly involves two things – both facility and fraud or circumvention; but I think it is very plain that in cases of this kind, as regards the mere fact, each of these has a bearing on the other. We cannot see into this man’s mind, as he is no more; we can only see the facts as they present themselves externally, and draw inferences from those; and each of the elements that is brought into the field may help the other, because if a result at variance with what appears to have been the deliberate purpose of the man, for a long time entertained, was brought about by questionable means, or by means that the jury considered to be questionable, that throws light upon the state of mind of the party. There cannot be a doubt that the two things bear upon each other.”
Lord Ormidale said at p 1048:
“In like manner, the fraud or circumvention which ought to be established in conjunction with weakness or facility may differ in degree according to circumstances. Nor is it necessary that there should be direct and positive proof of the fraud or circumvention. And in considering this matter, as well as the matter of facility and weakness, it is competent and proper for the jury to look at them not separately merely but also in combination, and in light of all the surrounding circumstances. I need scarcely add that amongst the circumstances there can be none more important than the nature of the challenged deed itself, the way in which it was obtained from the granter, and the relative positions of the granter and the party by whom it was obtained or procured from him.”
[7] Mackay v Campbell 1967 SC (HL) 53 was an action for implement of missives by the purchaser of the islands of Taransy and Gaskir against the seller, who pleaded that the missives should be reduced ope exceptionis on the ground that his signature to them had been obtained improperly while he was in a state of facility owing to a leg injury which caused him to be in a weak and facile state of mind and easily imposed upon because he wrongly believed that he might die and in any event that he would never be able to walk properly again and look after it. He averred that the pursuer, who thought his injury was trivial and that he would fully recover from it, negotiated with him, taking advantage of his false belief about the severity and consequences of his accident, that while still in hospital he signed a paper stating the price of the farm and stock, that the pursuer then told him he was caught by what he had signed, that the pursuer and the pursuer’s solicitor led him to believe that he had bound himself to sell the farm and that he believed he had no option but to sign the missives. In affirming the judgment of the Second Division the House of Lords held that, even assuming that the defender had made relevant averments of facility, these were not so strong as to relieve him of the necessity of averring and proving circumvention, that there were no relevant averments of circumvention as all the facts averred, in particular those concerning the document signed in hospital, were consistent with honesty on the part of the pursuer and his solicitor and that, the case not being one in which circumvention would be assumed, the defences were irrelevant. Lord Guest stated at pps 61-62:
“In assessing the relevancy of the appellant’s averments three matters have to be considered: (1) weakness and facility, (2) circumvention, and (3) lesion. These three factors are all interrelated and they must be looked at as a whole and not in separate compartments. The strength of averments on one matter may compensate for the weakness of averments upon other matters.
…
… There are no specific averments of the respects in which his mind was weak and facile. It is not said that his false belief in the severity of his illness and the consequences of his accident were so irrational as to lead to the conclusion that his sense of judgment was impaired. It is not suggested that he was suffering from any form of senile or other mental decay. A mere averment that he was in a weak and facile state of mind, without further specification, is not, in my view, sufficient. I am very doubtful whether there are relevant averments of facility; they are certainly not so strong as to relieve the appellant of the necessity of averring and proving circumvention.
‘Circumvention signifieith the act of fraud, whereby a person is induced to a deed or obligation by deceit’ – Stair, I, ix, 9. Bell’s Dictionary (7th Ed), p 181 puts the matter thus: ‘Circumvention; deceit or fraud’. This is not a case where the person upon whom the circumvention has been practised is dead or incapax, as may be in the case of reduction of a testamentary document. In such a case if facility or weakness of mind is satisfactorily averred and the deed is impetrated in favour of the impetrator or his relatives, there is probably no need to aver or prove any specific act of circumvention. Indeed, it may not be possible to do so, because the act would be in secret. Circumvention would in such circumstances be assumed. Such were the cases of Clunie v Stirling (1854) 17D 15 and Horsburgh v Thomson’s Trustees 1912 SC 267.”
[8] The most recent case is Horne v Whyte [2005] CSOH 15 in which Lady Smith reduced a codicil which altered a will to the disadvantage of the deceased’s family and to the advantage of his housekeeper. In dealing with facility and circumvention Lady Smith stated at para [51}
“For the pursuers to succeed under this head it is necessary that they establish (1) the facility of the deceased at the time the codicil was made; (2) acts of circumvention or fraud which impetrated the codicil; and (3) lesion. Direct evidence is normally required for the first and third of these elements but the second, for obvious reasons, is usually, where the granter of the deed is dead, a matter of inference (see: Clunie v Stirling (1854) 17D 15; Mackay v Campbell 1967 SC (HL) 53; Pascoe-Watson v Brock’s Executor 1998 SLT 40; Gaul v Deerey and Others 2000 SCLR 407). The three elements are clearly interrelated, they require to be looked at as a whole and the strength of a pursuer’s case on one matter may compensate for weakness on other matters (Mackay v Campbell; Pascoe-Watson v Brook’s Executor).”
In that case there was found to be strong proof of all three elements and reduction was granted.
Undue Influence
[9] The leading case on undue influence is Gray v Binny (1879) 7R 332, in which a mother and her solicitor persuaded her son to disentail an estate in exchange for very inadequate consideration so that she could obtain funds to pay off her debts. The deed was reduced in the Outer House on the ground of undue influence and in the Inner House Lord Shand stated as follows at pps 347-8:
“The circumstances which establish a case of undue influence are, in the first place, the existence of a relation between the granter and grantee of the deed which creates a dominant or ascendant influence, the fact that confidence and trust arose from that relation, the fact that a material and gratuitous benefit was given to the prejudice of the granter, and the circumstance that the granter entered into the transaction without the benefit of independent advice or assistance. In such circumstances the court is warranted in holding that undue influence has been exercised; but cases will often occur – and I think the present is clearly one of that class- in which over and above all this, and beyond what I hold to be necessary, it is proved that pressure was actually used, and that the granter of the deed was in ignorance of facts, the knowledge of which was material with reference to the act he performed. In such a case the right to be restored against the act is of course made all the more clear.”
[10] The case of Horne v Whyte (supra) was also pleaded on the basis of undue influence. The following passages from the opinion of Lady Smith are relevant:
“[60] It was submitted on behalf of the pursuers that the codicil fell to be reduced in any event on the ground of undue influence. Historically the ground is a distinct one although as commented in the case of McKechnie v McKechnie’s Trs 1908 SC 93 at p 98:
‘… if there is anything in the nature of weakness or facility in such cases, the weakness or facility will make it much more easy to hold that person acted under undue influence.’
[61] This is, of course, a case in which, as I have already indicated, there is clear evidence of facility at the relevant time.
[62] I agree with the pursuers that the defender was plainly in a position to exert the relevant influence on the deceased. It was not disputed on her behalf that she fell into the category of persons to whom the doctrine can apply and the authorities support that view (eg Gray v Binnie (1879) 7 R 332; Honeyman’s Executors v Sharp 1978 SC 223).
[63] The essence of any case of undue influence is that where a person is in a relationship of confidence or trust with another then he has a duty in his dealings with that other person not to take advantage of them for reasons of self-interest. In short, such a person must refrain from abusing or exploiting the confidence or trust reposed in him by the other person in such a relationship.”
[11] Lady Smith then cited the above passage from the opinion of Lord Shand in Gray v Binnie and continued:
“[64] Also relevant are the comments by the Lord Chancellor in the case of Weir v Grace (1899) 2F (HL) 30 at p 32, where he states:
‘the conduct of a person in vigorous health towards one feeble in body, even though not unsound in mind, may be such as to excite terror and make him execute as his will an instrument which, if he had been free from such influence, he would not have executed. Imaginary terrors may have been created sufficient to deprive him of free agency. A will thus made may possibly be described as obtained by coercion.’”
Mrs Matossian’s health
[12] Mrs Matossian latterly kept poor health. She suffered from high blood pressure and bad leg ulcers. She was being prescribed perindopril and aspirin for her high blood pressure and antibiotics for her leg ulcers. On 26 March 2007 it was noted in her medical records that her right leg ulcer was foul. On 11 April 2007 she was prescribed the analgesic co‑codamol for pain caused by her leg ulcers, later changed on 26 April 20007 to the more powerful analgesic co‑dydramol. On 20 April 2007 she attended the treatment room at Parkhead Health Centre, where it was noted that her leg ulcers were generally pruritic and worsening and she was referred to the district nurse. On 4 May 2007, while she was staying with Alex in Blairgowrie, the GP who saw her there, Dr Gatherer, advised admission to hospital because the condition of her ulcers was so bad. Dr H S Bhachu, her GP in Glasgow, did not consider that her treated conditions at this time would have had any effect on her mental capacity.
[13] Mrs Matossian also suffered from poor memory at the material time. Mrs Shona Stride, the district nurse who saw her at home in Glasgow on 26 April 2007, noted, in the section of her records dealing with emotional/mental state “Cognitive impairment, no recent recall”. Mrs Stride also made an entry “exceptionally poor living circumstances”. She deduced from this entry that the house was most likely cluttered, unkempt and quite dirty. Mrs Matossian was in pain from infected ulcers at the time. When she was seen by the local GP at the Ardblair Medical Practice in Blairgowrie, Dr Gatherer, on 4 May 2007 during a stay with Alex at Estrada he noted ”Mrs Matossian appears malnourished and appears to have been living in a state of self‑neglect.” Mrs Moira Brown, a nurse at the Ardblair Practice, treated Mrs Matossian for her leg ulcers (which she described as “a bit of a challenge to treat”) over several months in 2007 while she was staying with Alex at Estrada. She said Mrs Matossian’s health was not very great and Alex tried to fatten her up a bit. She was initially housebound but her ulcers cleared up, she improved and was able to travel to Glasgow on her own. She described Mrs Matossian as “OK mentally but a bit forgetful”. She thought she was “quite with it”, but she had to explain things to her more than once. Her input with Mrs Matossian at that time came to an end once the ulcers healed. The evidence of Alex was that at the end of April 2007 Mrs Matossian appeared to have been surviving on sweets for a period, had lost a significant amount of weight and that on 28 April 2007 he found the food in her fridge to be all rotten. There was also a body of evidence to the effect that Mrs Matossian was generally frail in April and May 2007.
Events before 25 April 2007
[14] In 2004 Mrs Matossian offered to transfer the Drumover Drive properties to Berj and Richard and 592 to Berj. On 24 August 2005 Richard contacted Mr Couston about the transfers of the titles. On 1 September 2005 a meeting took place at Richard’s house in Forfar (to which Mrs Matossian had been driven by Berj) attended by Berj, Richard, Mrs Matossian and Mr Couston at which the details of possible transfers of Mrs Matossian’s three properties were discussed. Professional valuations of the three properties were thereafter obtained. Discussions between Richard and Mr Couston followed. On 17 July, 3 August and 3 October 2006 and 12 January 2007 Mr Couston sent Richard reminder letters. On 31 January 2007 there was a further meeting at Richard’s house in Forfar attended by Berj, Richard, Mrs Matossian and Mr Couston at which there was a lengthy discussion about the transfers of the titles to the three properties. On 24 April 2007 Mr Couston sent out draft deeds to Berj and Richard, but not to Mrs Matossian.
[15] Over the same period Mrs Matossian was also having dealings through Alex with Mr Lancaster. There was a meeting between the three of them on 15 November 2006 at Mr Lancaster’s office during which Richard presented a pro-forma will of Mrs Matossian which he personally had written. Mrs Matossian told Mr Lancaster that she did not have a will and that she wished to make one under the Will Aid Scheme in accordance with the completed pro‑forma. In terms of the completed pro-forma it was stated that Mrs Matossian wished to bequeath 101 to Alex, 99 to Berj and 592 to Richard. In his file note Mr Lancaster made the following entry:
“She was also asked whether or not she would wish to transfer any of the properties during her lifetime and the implications of this with regard to IHT, CGT and means tested benefits. She said that she would consider this at a later date having considered further the issue of CTG (sic) as a starting point.”
On 20 November 2006 Mr Lancaster received from Alex instructions about the terms of Mrs Matossian’s will. On 8 January 2007 Mr Lancaster sent to Alex a copy of the draft will along with a copy of a letter sent to Mrs Matossian.
Events of 25 April 2007
[16] Mrs Matossian had an appointment for a home visit by the district nurse to treat her ulcers on the morning of 25 April 2007. The nursing record for that day reads “Unable to gain access. Son phoned, stated mother did not want a visit today.” The son referred to was Berj, who that morning drove Mrs Matossian from her home in Glasgow to Richard’s home in Forfar, where another meeting took place attended by Berj, Richard, Mrs Matossian and Mr Couston at which she signed the three deeds now under challenge. Mr Couston’s typed file note of that meeting, so far as relevant, reads as follows:
“Attendance with Mr R Matossian Berj Matossian and Mrs Audrey Matossian at Mr R Matossian’s property.
They had already discussed with Richard/Berj and previously with Mrs Matossian the transfer of the 2 properties at Drumover to Richard and Berj and also the property at Tollcross.
With regard to the property at Tollcross as before we indicated that we thought it would be best if some search was made for the original deed. If not then we would have to consider an alternative method.
…
The 2 properties at Drumover were discussed and it was emphasised strongly to the clients the implications of gifts with reservations and the fact may still be very relevant on the death of their mother (sic). They fully accepted that and would take the risk.
With regard to the houses at Drumover Mrs Matossian was a bit sleepy after the journey but aware obviously of what was going on, was happy to sign the Disposition reserving the life rents (sic).
With regard to Tollcross because we couldn’t do the title at the moment the matter of a gift (which had been discussed before) was discussed at this meeting. All parties particularly Mrs Matossian was (sic) happy and she signed the deed of gift.
As to what happens next we would arrange for the registration of the Deeds for Drumover and wait hearing back … with regard to Tollcross.”
Events of 3 and 4 May 2007
[17] On 3 May 2007 Mrs Matossian and Alex called on Mr Lancaster at his office in Coupar Angus. She and her dog had been taken from Glasgow to Blairgowrie by Alex on 29 April 2007. She received treatment for her ulcers on 30 April at Blairgowrie Cottage Hospital. Mr Lancaster’s attendance note for the meeting of 3 May reads as follows:
“Attendance with Mrs Matossian and her son Alec (sic). First of all inviting Mrs Matossian to have the meeting in private but noting she wanted her son to be with her. Thereafter explaining to her the contact that we had had from her two other sons and our concerns regarding this. In particular we are concerned to try and ensure that whatever will she makes is not challenged on the basis of undue influence. Discussing the relevant issues with her and trying to ascertain from her what her views were with regard to the situation. She was clearly dispirited by the disagreement between her three sons. It appears that Alec does not get on with the other two but they get on with each other. The other two are both married with family with Richard being a vet and apparently financially secure. She had previously made over the property to her son Alec and the other two had received the contents including antiques from one of the properties in Glasgow. It is clear that there is ill feeling between them. When asked if she wanted to make a will that meant one would receive less than the others she said no. This was contrary to what had been discussed previously. She was, however, clear that Alec attended to most things for her but her other son Borj (sic) had been of great assistance over the years as well. It was clear to her that if she appointed more than one of them to be executors they would not get on with each other. It was explained to her that before she finalised her instructions we would want to be able to meet with her on her own so that it could be demonstrated that whatever she decided it was free of undue influence. She did not want us to discuss any matters with her other two sons. Matters were left on the basis that she would give matters further consideration and hopefully make an appointment again the following week. It was also explained to her that because of these developments our own charges would now be higher.”
[18] The following day she returned to Mr Lancaster’s office along with Alex and signed the will in his presence. Mr Lancaster’s attendance note of that meeting reads as follows:
“Attendance with Mrs Matossian on her own while her son waited in the waiting room. Discussing with her the issued (sic) which had been discussed with her at the previous days (sic) meeting. She was asked again if she wished to proceed on the basis of the existing will or whether she wished to amend this to represent an equal division between her three sons. She was also asked whether or not she considered her son Alex was trying to influence her. It was clear that she was reluctant to consider the sale of the properties at this time and seemed to have a personal attachment to them and seemed to result in her not wanting to (sic) them being sold following her death either. She considered that it was fair to have an unequal division between her three sons because Richard was in a better financial position than the other two. She would not consider appointing them all as Executors because they would all argue. It was clearer (sic) to her that ideally she would wish the three sons not to bicker and argue about her affairs. She seemed to consider that they were all guilty of this. For these reasons she made it clear that the existing will represented what it was that she wanted. She also wanted Alex to rejoin the meeting at that stage and he was invited to do so. She was asked about funeral instructions and advised she should (sic) not have any definite views in this regard at the moment and would have to think about that. She confirmed again that she simply wished to have the will signed today and she pointed out a couple of typographical errors and the wrong spelling of her son Richard’s address. She was asked what she wanted done with the original will and the various options were explained to her. She advised that she wanted it retained in the office. She was also definite that she wanted the copy sent C/O her son’s address in Blairgowrie and not sent to Glasgow. She had previously at a former meeting denied having discussed the terms of the draft will with her son Berj. In my telephone conversation with her son Richard he had said that Berj had discussed the terms of the will with her and she did not want to go ahead with it. She also said that she would like to go ahead with the Power of Attorney and the form of this and the aspects in regard to welfare and financial (sic) were discussed with her briefly. She advised that she may have to go into hospital shortly for treatment of her leg ulcers and her son Alex seemed to think that there was some urgency in progress this (sic) because of this reason. However the situation was explained to them and there were no specific matters which either of them could state which required the Power of Attorney to be put into place as a matter of urgency. Matters were left on the basis that he would phone again on Tuesday to update us as to his mother’s present situation and matters would be progressed from there.”
On 4 June 2007 Mr Lancaster sent a copy of the will, along with his account, to Mrs Matossian at Estrada.
Subsequent events
[19] On 15 October 2007 Alex spoke on the phone to Mr Lancaster, whose attendance note reads as follows:
“Attendance at telephone with Alec Matossian … on our call returning his call. Noting that he has now discovered that apparently his mother has signed over the two flats (sic) at Drumover Drive, Glasgow to his two brothers obtaining a liferent in favour of herself sometime around the end of April. This was when his mother was in very poor health. His mother has said that she recalls coming up to Forfar on a couple of occasions and that on one of these she does remember a Lawyer being present and the name Gair Couston was mentioned. It was confirmed that Mr Coustin (sic) is a partner in the firm of Shiells in Brechin. Advising with regards to the implications of this with regard to ownership of the properties and the terms of the will. Also advising with regard to what steps may now be taken with regard to recovering the file and possible action that may follow thereon.”
[20] On 7 January 2009, following previous conversations, Mr Lancaster had a meeting at his office with Mrs Matossian and Alex. The relevant portions of his attendance note read as follows:
“Attendance with Mrs Matossian and her son Alex further to previous conversations with Alex regarding the conveyance of the properties in Glasgow to his brothers. Having initial discussion advising Mrs Matossian of what we understood the nature of the concerns were i.e. that she had not meant to transfer the properties and thereafter meeting with her on her own to discuss what she could recall regarding the circumstances.
She confirmed that she remembered travelling up to Forfar in January 2007 with her son Berj to visit her son Richard. Whilst at Richard’s house she remembers meeting a man who she was later advised was a solicitor and whose name she understands was Gair Cosuton. She remembers talking about the houses in Glasgow and her recollection is that she had said that she wanted the houses to go to Berj and Richard when she died. Otherwise she was fairly vague about this. She did not have any clear recollection of having met with me the previous October/November to discuss her will.
She does not remember any discussion about inheritance tax, capital gains tax, nursing home charges etc. She accepts that it is her signature on the mandate to Maclay Murray & Spens but did not remember signing this. She did not think anything further was going to be happening after the meeting and she had heard nothing further from Mr Couston.
She recalls going back to see Richard in April again with Berj and again meeting Mr Couston in Richard’s house. She recalls signing a document but again she did not understand the purpose of this. She did not read it. She had thought it was making provision for what was to happen to the properties when she died.
Later having been told by her son Alex that she had transferred the houses to Berj and Richard she had asked Berj about it. He had said that he had the documents for the flats. Later when she asked him for them back he denied having them.
She was also concerned that Berj and Richard have been into the properties in Glasgow and taken away various valuable items.
She stated that she now wanted to have the houses back. She continues to live in 101 and 99 is empty. The flat at Tollcross is also empty.
Thereafter Alex rejoined the meeting. …
…
She also wanted to try and cancel the Deed of Gift in respect of the flat at Tollcross. …”
[21] On two or three occasions on unspecified dates but during the period when she was staying with Alex in Blairgowrie Mrs Matosssian spoke to Sylvia Simpson, a friend of Alex, about her properties in Glasgow. She told Miss Simpson that she had three properties in Glasgow and that she believed she was forced into signing something she should not have signed. According to Miss Simpson she just kept saying she shouldn’t have done it and it obviously worried her. Miss Simpson thought it preyed on Mrs Matossian’s mind.
[22] Mr Lancaster again saw Mrs Matossian and Alex on 3 April 2009. His attendance note for that meeting, so far as relevant, reads as follows:
“Attendance with Mrs Matossian and her son Alex going over the draft letter to Messrs Shiells Solicitors and discussing the content thereof. Noting one or two adjustment (sic) being required and receiving instructions to issue the principal. Mrs Matossian still remained a bit wandered with some of the discussions i.e. she would go off at a tangent to discuss particular issues rather than staying in focus with regard to the issue being discussed. She also stated her position on a number of occasions that she wanted the properties at 99 and 101 Drumover Drive to go to her sons Richard and Berj provided that she still had them when she died. However, in general terms it remained clear that her position was that she had not understood what she had previously signed when the properties were being transferred. Also going over the documentation for the revocation of the deed of gift and having this signed. It was made clear that would (sic) could not state whether or not this would be of any effect as we had not seen the deed of gift itself. We would revert once we heard further from Shiells.”
[23] On 7 April 2009 Mr Lancaster wrote a lengthy letter to Shiells setting out the whole history of the matter and posing various questions to which he sought answers from them. These questions were:
“1. Did Mrs Matossian understand the implications of what was being signed by her when she met with you on 25th April 2007?
2. Was appropriate professional advice provided to her in connection with the property transfers?
In this regard we would request that you respond to the following specific points, namely:
(a) Why was no written correspondence issued to Mrs Matossian?
(b) Why was Mrs Matossian at no time seen on her own?
(c) How did you satisfy yourself that Mrs Matossian was aware of the IHT implications?
(d) Why were liferents reserved in respect of both properties at 99 and 101 Drumover Drive, Tollcross, Glasgow? We understand that Mrs Matossian’s home is 101 Drumover Drive. What was the purpose of the reservation of the liferent for the other property?
(e) Why does your file not record that advice was given with regard to capital gains tax implications?
(f) Was any assessment carried out with regard to consequences for means tested stated (sic) benefits? If so why is this not recorded in the file?
(g) What advice was provided with regard to liability for future maintenance and repair?
(h) How did you satisfy yourselves that she was not under undue influence and had sufficient capacity to understand the issues involved?”
[24] The reply from Shiells, signed by Mr Couston, is dated 1 May 2009. It is, so far as relevant, in the following terms:
“Having now had an opportunity to consider my Firm’s correspondence file may I respond to the various matters raised in your letter of 7th April as follows:-
- I would confirm that my initial contact on the matter of the possible transfer of the properties was through Mr Richard Matossian who was an existing client of my Firm at that time.
- My attendance note of 31st January followed upon conversations with Mr Richard Matossian when he advised that his mother, brother Berj and himself had been discussing amongst themselves the transfer of the properties at Drumover Drive and Tollcross Road.
- Whilst first contact was through Mr Richard Matossian it was always my understanding that the family (made up of Mrs Matossian, Richard Matossian and Berj Matossian) were the Clients.
- It was apparent to me at the meetings that the family had been discussing previously amongst themselves the property transfers. It was not something that arose at the meetings.
- The possibility of a Will and Power of Attorney being drafted by me for Mrs Matossian was raised by me but I was instructed by Mrs Matossian not to take those matters any further. Mrs Matossian did not advise me that she was instructing the preparation of a Will in which the properties were to be specifically mentioned and dealt with.
- Following upon the two meetings with Mrs Matossian I was totally convinced that she understood the discussions and was not being unduly influenced or pressured in any way. In such situations as this I am always careful to ensure by time spent with a Client and through specific and general conversation that the Client is clear on what is happening and is acting totally voluntarily.
- I note that the final paragraph of my attendance note of 31st Janaury 2007 reflects Mrs Matossian’s instructions to me not to write to her on the matter but to correspond with her two sons Berj and Richard – but primarily Richard.
- As I had no doubts at all about Mrs Matossian’s capacity to understand what was happening and the implications of what she was doing and that she was under no pressure, I took the view that time with Mrs Matossian on her own was not necessary. I do have a recollection of this being discussed. It is not however noted on file.
- The issue of Inheritance Tax was discussed including gifts with reservation. I was advised that that was not an issue to the family. Accordingly the matter was not pursued further.
- Mrs Matossian specifically instructed that both properties included a reservation of a liferent.
- The issue of Capital Gains Tax and State benefits were not specifically discussed at the meetings.
- I accept that this is not noted on the file but I do recollect discussion taking place about maintenance and repairs and that Richard and Berj were to undertake such work.”
[25] On 21 July 2009 Mr Lancaster had a meeting with Mrs Matossian and Alex to discuss the reply received from Mr Couston. Mr Lancaster’s attendance note, so far as relevant, reads as follows:
“It remains the situation that Mrs Matossian could not remember clearly the details of the two meetings, however, (sic) both meetings had taken place in Richard’s house and at the first meeting Mr Couston appeared to be a friend of Richard’s and she was not aware of him being a lawyer. As far as she was concerned he was not acting on her behalf. She remembers discussing her properties but only in general terms. Her recollection of the meeting in April was very unclear. It had certainly not been her intention to give up ownership of the properties. She did not understand the terms liferent and was unclear about the details with regard to inheritance tax. … Following lengthy discussions it was agreed we would write to Mr Couston re-iterating the concerns and setting out her position being that if Richard and Berj voluntarily transfer the properties back to her that will be an end to the matter otherwise she will pursue it further.”
[26] Mr Lancaster wrote again to Mr Couston on 23 July 2009. The relevant portions of that letter are as follows:
“Firstly, it is Mrs Matossian’s position that the meeting of 31st January 2007 took place at Richard Matossian’s house and that you were introduced to her as a friend of Richard’s. She advises that at that stage she was not aware that you were a solicitor or that the intention was that you were to act on her behalf as such. She does recall there having been a discussion with regard to the properties but it is her recollection that she left that meeting having issued no instructions and that she did not anticipate any action being taken. It is noted that in your file note in respect of that meeting you record that Mrs Matossian had been ‘to see a solicitor in Coupar Angus ‘ and that you were shown a letter that had been presented by them but that from that letter it ‘didn’t seem that anything had been done’. According to our file the only letter that we had written to Mrs Matossian prior to that date was our letter of 8th January 2007. Enclosed with that letter was a draft will which Mrs Matossian was asked to consider and thereafter revert to us. The terms of the covering letter summarise the provisions of the will which was (sic) contrary to the ‘instructions’ then issued to yourself in that it included provisions in respect of the properties which were to be transferred. A copy of our letter is enclosed for your information. Do you accept that that was the letter that was exhibited to you at the meeting? If so this raises a concern as to why the apparent conflict was not questioned.
…
In general terms I am concerned that various assumptions appear to have been made. For example, you appear to assume Mrs Matossian’s understanding of the implications with regard to inheritance tax, however, (sic) when I have discussed such issues with Mrs Matossian she does not appear to have any clear understanding with regard to such implications.
It is noted that she was not spoken to separately and that no correspondence was ever issued to her directly or via either of her sons. It is noted that you regarded all three to be your clients. It is also noted that correspondence was issued to the sons but not to Mrs Matossian. In particular it is noted that no Terms of Business letter was issued in apparent contravention of the relevant rules. I also note no money laundering procedures appear to have been carried out.
In such circumstances it is my opinion that the solicitor’s role is more than just drawing up and registering the necessary deeds in order to give effect to the gifts. I think it is reasonable to consider that a solicitor has a duty to ensure that the client fully understands the nature, effect, benefits, risks and foreseeable consequences of making the gits.
It also appears that there was at least the risk of a conflict of interest between Mrs Matossian as the disponer and her sons as the disponees. No advice appears to have been provided to Mrs Matossian as to the possibility of a conflict of interest and no enquiry made as to whether or not she may wish to seek independent advice.
No enquiry appears to have been made with Mrs Matossian as to her motivation for making the gifts. There certainly seems to have been no inheritance tax benefit and it does not appear to have been done for the purposes of means testing. If she wished to simply gift the properties to her sons this could have been achieved by the means of a will. That would of course have had had the benefit of allowing Mrs Matossian to have changed her mind had she chosen to do so. That choice has now been removed from her.
No advice appears to have been given with regard to capital gains tax. Principal residence exemption would apply to the house in which she resides but would not apply to the other properties. I understand that no tax return has been made in this regard.
No provision was made with regard to the future maintenance and repair of the properties. There is no clarity as to who is to be responsible for what costs. No advise (sic) appears to have been given with regard to the potential implications of bankruptcy, divorce or death.
Furthermore, there is also the consideration as to Mrs Matossian’s medical condition when the deeds were signed on 25th April 2007. It is clear to us that at that time she was ill and was receiving medical treatment. …
…
It remains Mrs Matossian’s stated position that it was never her intention to convey the properties to her sons. I am presuming that you still act for them.
I am instructed to advise that if Richard and Berj voluntarily re-convey the properties to our client she will be content with that. Failing this it is her intention to pursue this matter further by the various means open to her.”
[27] Mr Couston replied by letter of 11 August 2009, the relevant portion of which is in the following terms:
“It seems almost dismissive not to respond in detail to your letter of 23rd July. Please be assured that I am not. However, I think my position has been outlined in my letter to you of 1st May. There has been much reflection since then. I remain of the view that the action which I took was based on clear and unambiguous instructions from your client, Richard and Berj. Had I been in any doubt as to those instructions I would not have taken the matter forward as I did.”
[28] In addition, both Berj and Richard wrote personally to Mr Lancaster in response to his letters to Mr Couston. In a letter dated 13 September 2009 Richard responded to Mr Lancaster’s letters of 7 April and 23 July 2009 as follows:
“Firstly I am reluctant to be drawn into any legal dispute with my own mother and or my brother Alexander. Your letters (sic) content, which I presume is based upon information provided to you from my mother, is incorrect. Because of this I believe my mothers (sic) recollection of the family meetings with Gair Couston, the discussions that took place and her involvement in those discussions to be inaccurate. I have no doubt that at that time my mothers clear personal motives and purpose were loving and honourable and were in favour of her two eldest sons Berj and myself. Her considered intention, the gifting of property, was that it could not be reversed. Because I know this to be true I do not intend to reconvey the property.
The two houses in Drumover Drive were transferred to us nearly 2 ½ years ago. They have become our responsibility and my brother Berj and I have as promised taken this seriously. You may be aware that both houses are in a serious state of disrepair. Over the last 18 months my family and I have devoted our spare time travelling to Glasgow, doing the labour intensive ground work to prepare No. 99 for extensive building works by contractors which are now well under way and have come at considerable cost. Prior to December 2008, when my mother moved to Estrada in Blairgowrie, I was keeping her fully informed about the work in hand. My intentions were to carry out the improvements necessary to provide a comfortable home or benefit, if the time came, for my mother or my children. This was always the case and would also honour the reservation still held by my mother if she so wished.”
[29] On 16 September 2009 Berj wrote to Mr Lancaster in response to his letter of 31 August 2009 in the following (so far as relevant) terms:
“Your client’s (Mrs Audrey Matossian) ‘free will’ was in fact the driving force, both in motivating and re-asserting a dialogue with Gair Couston, and orchestrating his pursuit of legally embracing her specific and clear criteria with respect to the resultant gifting of her Drumover Drive properties, namely 99 and 101. I would also include that your client, with respect to her main properties, namely Estrada, Golf Course Road, Blairgowrie and 99 and 101 Drumover Drive, Glasgow, from the 1970s to 2007, regularly and repeatedly voiced to myself and others, her aim and intention to distribute these three properties, by giving one to each of her three sons, at some point in her life. The Inheritance tax implications with respect to these intentions have long been a source of family controversy, well known to your client, my mother, over the decades and also her power of attorney, Alexander. However, her actions with respect to the giving of the Drumover Drive properties, were a confirmation of her long established intentions, which mirrored a similar gifting arrangement she had similarly and privately conducted with Alexander, in respect of Estrada, Blairgowrie at an earlier date, of which you may be aware.
…
I am in no doubt that it was my mother’s objective, at the respective time, to establish beyond question her wishes and intentions, in respect of the Drumover Drive properties.”
[30] Deadlock having been reached, the present action was ultimately raised by Alex as executor-nominate under the will in April 2012.
Discussion
[31] All three brothers gave oral evidence at the proof. The evidence of each was extensive and wide-ranging, as well as prolix and discursive. None of them did himself any credit. Each was plainly intent on keeping Mrs Matossian close to him in order to be able to exercise influence over her for his own benefit. The ill‑feeling between Alex on the one hand and Berj and Richard on the other hand was evident. It was clear that each of them wished his “day in court” and that he was determined not to be denied it. The proof to which I listened consisted of the undignified spectacle of a family feud. Large portions of the evidence were irrelevant and I do not propose to comment on them. The evidence which principally requires to be focused on and analysed for the purpose of determination of this action is that relating to the events of 25 April 2007 when Mrs Matossian signed the deeds at Richard’s house and the evidence of relevant events before and after that date as outlined above. The question which has to be considered is whether those deeds were impetrated from her by means of facility and circumvention and undue influence by Berj and Richard exercised over her by them. That is the question which I now turn to consider.
[32] On any view the circumstances of the signing of the deeds by Mrs Matossian at Richard’s house on 25 April 2007 were unusual and irregular. At that time she had her own solicitor in the form of Mr Lancaster, whom she had consulted in November 2006 about her affairs. Her meeting with Mr Couston was instigated and arranged at a time to suit Berj and Richard (particularly Richard) and at a time unsuitable to Mrs Matossian, whose appointment with the district nurse that morning was cancelled by Berj so that he could transport her to Forfar to sign the deeds. She was suffering from pain caused by her leg ulcers, as a result of which she was distressed. She was 79 years old, generally forgetful and malnourished and, on the day itself, sleepy when she arrived at Richard’s house. Although Mr Couston said that he regarded “the family”, consisting of Berj, Richard and Mrs Matossian, as his clients on 25 April 2007, I do not accept that Mrs Matossian was then his client. I doubt if he gave much advance thought to the question of who his client was, although in one of his file entries he referred to Berj and Richard as “the clients”. In my view his client was Richard, for whom he had previously acted, and to whom the fee was subsequently rendered. There was at no time any written communication between Mr Couston and Mrs Matossian: for example, he did not send her any drafts of the deeds before the meeting or any copies of them afterwards. He knew nothing of the details of her financial affairs or what the effect of her disposing of the three properties for no consideration would be on her financial position. He gave her no advice on the potential consequences of the transactions on her liability to capital gains tax or inheritance tax or her entitlement to social security benefits. The disposal of the three properties by Mrs Matossian at the material time was deemed to be at market value: sections 17, 18 and 286 of the Taxation of Chargeable Gains Act 1992. The market value of each of 99 and 101 was £125,000 and that of 592 was £35,000. As 99 and 101 had been purchased by her in the 1960s and she had inherited 592 from her mother in 1992 it is likely that the disposals would have given rise to chargeable gains. She would have been able to claim principal private residence relief for 101 and possibly for some of the gain on 99, but the remainder of the value of 99 and all of the value of 592 would not have been covered by such relief. Mr Couston did not ask Mrs Matossian if she wished to be separately represented, although the proposed transactions were to her detriment and to the benefit of Berj and Richard. Had Berj or Richard brought his wife to execute similar deeds, Mr Couston would have been obliged to inform her of her right to separate legal representation: Smith v Bank of Scotland 1997 SC (HL) 111. Mrs Matossian’s subsequent conduct in executing her will on 4 May 2007 is wholly inconsistent with a real intention on her part to dispose of her three heritable properties in the way in which she purported to do on 25 April 2007. So also is what she told Mr Lancaster thereafter when she spoke to him on her own, as recorded in his attendance notes, as well as what she told Sylvia Simpson in Blairgowrie. I was very impressed by Mr Lancaster as a witness: he struck me as a competent, careful and meticulous solicitor. I place considerable store on what he recorded in his attendance notes and find that he faithfully and correctly recorded all his dealings in these notes.
[33] In light of these findings I conclude that when Mrs Matossian signed the three deeds on 25 April 2007 she was subject to facility and circumvention as well as undue influence at the instance of both Berj and Richard. The circumstances of the signing of the three deeds are eloquent of both facility and circumvention and undue influence, the requirements of each of which I have set out in full above. I am satisfied that on 25 April 2007 Mrs Matossian was suffering from weakness of mind, that acts of circumvention by Berj and Richard impetrated the execution of the three deeds and that she suffered lesion as a result. I infer circumvention from the whole circumstances of the execution of the deeds, as narrated above. Lesion consists in her having divested herself of her entire heritable estate for no consideration. I reject any evidence from Richard, Berj and Mr Couston to the contrary. So far as undue influence is concerned, I am satisfied that all the requirements, as set out above, have been established by the evidence. There was a relationship that created a dominant influence (sons and mother), confidence and trust arose from that relationship, a material benefit was given to the prejudice of the grantor and there was an absence of independent advice and assistance.
The two letters said to have been written by Mrs Matossian
[34] Reliance was placed by Alex in the course of the proof on two manuscript letters said to have been written by Mrs Matossian to Mr Lancaster. These are 6/10 and 6/11 of process. Both are undated. The first was written in response to Mr Couston’s letter of 1 May 2009 and the second in response to the replies from Richard and Berj dated 13 and 16 September 2009. I am not satisfied that either of these letters was composed or written by Mrs Matossian and have therefore ignored them in reaching my decision. The phraseology used is remarkably similar to that used by Alex in other correspondence and the handwriting shows signs of having been contrived. In my view Mrs Matossian would not have had the inclination or application to sit down to compose and write these letters. It is likely that these letters were composed and written by Alex himself.
The counterclaim
[35] Richard and Berj have a counterclaim based on unjust enrichment against Alex for repayment of the money they have spent on 99 and 101 since April 2007 in the event of reduction being granted. In my opinion this claim is irrelevant and falls to be refused. The dispositions of these two properties having been impetrated by both facility and circumvention and also undue influence, that means that Richard and Berj committed a wrong and were mala fide possessors who are not entitled to any recompense for meliorations made by them to 99 and 101: Trade Development Bank v Warriner & Mason (Scotland) Ltd 1980 SC 74 per the Lord President (Emslie) at p 98. In any event it cannot be said that Alex was unjustly enriched in his capacity as executor‑nominate of Mrs Matossian, which is the capacity in which he brings this action.
Decision
[36] For the reasons given above I shall sustain the plea‑in‑law for the pursuer in the principal action and grant decrees of reduction in terms of conclusions 2, 4 and 6. It would be otiose to grant decree of declarator in terms of conclusions 1, 3 and 5: Brown v Hamilton District Council 1982 SC (HL) 1 per Lord Fraser of Tullybelton at p 46. I shall repel the defenders’ pleas‑in‑law and sustain the pursuer’s first and second pleas‑in‑law in the counterclaim.