Gibbons v Wright

The plaintiff, Bessie Melba Gibbons, brought an action in the Supreme Court of Tasmania against Reginald Charles Wright, as executor of the wills of Olinda Gibbons and Ethel Rose Gibbons, and Leonard Charles Pitfield, as Recorder of Titles. The dispute concerned the ownership of certain land in Hobart. The plaintiff claimed to be the sole surviving joint tenant of the land, having acquired her interest alongside Olinda and Ethel Rose Gibbons. The defendant Wright, however, contended that the joint tenancy had been severed prior to the deaths of the sisters, leaving the plaintiff with only a one-third undivided share as a tenant in common.

The central legal issues before the court were: firstly, the test for mental capacity required for the validity of transactions, and secondly, the effect of such incapacity on conveyances, powers of attorney, and contracts, specifically whether they are void or merely voidable, and who has the right to elect to avoid a voidable transaction. The plaintiff sought declarations that a purported transfer severing the joint tenancy was ineffective and that she was the sole owner of the land by survivorship. The defendant sought to uphold the severance of the joint tenancy.

The court reasoned that the law does not prescribe a fixed standard of sanity for all transactions. Instead, it requires that each party possess the capacity to understand the general nature of what they are doing. For written instruments, this means being capable of understanding the general purport of the document when explained. A power of attorney given by an incapable person is void, as is an instrument signed by someone incapable of understanding they were making a signature. However, other instruments signed by a party incapable of understanding their general purport are at most voidable, not void. If an instrument is voidable due to mental incapacity, it remains valid unless and until an election to avoid it is made by the party or their representatives.

Following a jury finding that neither Ethel Rose Gibbons nor Olinda Gibbons was capable of understanding the nature and effect of the mortgages and the memorandum of transfer executed on 11th October 1944 and 6th December 1945 respectively, the trial judge declared these instruments to be nullities. However, the Full Court of the Supreme Court of Tasmania set aside this judgment, holding that dispositions for valuable consideration by an incapable person are voidable only if the disponee knew of the incapacity. As the plaintiff declined to amend her pleadings to allege such knowledge, the Full Court allowed the appeal. The High Court ultimately found that the instruments were voidable, not void, and as neither sister had elected to avoid them during their lifetimes, and the executor affirmed their validity, the plaintiff's claim failed.