Transfer of property at undervalue — Power of attorney — Undue influence — Whether presumption of influence rebutted — Whether breach of attorney’s fiduciary duty — Whether breach of section 3(4) and (5) of Enduring Powers of Attorney Act 1985 — Claim allowed
The claimant, a 78-year-old man, wished to remain in his house but was concerned that he could no longer afford the mortgage repayments and upkeep costs. He agreed to transfer the property to his nephew, the first defendant, in consideration of the nephew taking over the mortgage liability and allowing the claimant to continue to occupy the house, rent-free, for the remainder of his life. The claimant granted an enduring power of attorney to the second defendant, the first defendant’s father, to make all the arrangements pertaining to the sale.
Because the property was being sold at an undervalue, it was considered necessary to appoint a solicitor to act for the claimant. The solicitor interviewed the claimant before the transfer was signed, and discussed the effect of the power of attorney and the details of the property transaction. He did not discuss the claimant’s background and family history, or the extent of his rights under the contract.
The sale was later completed by the second defendant in exercise of his power of attorney, and the first defendant’s title was registered. The transfer did not record the terms of the oral agreement as to the claimant’s future occupation of the property.
The defendants subsequently asked the claimant to vacate the property. The claimant brought proceedings to set aside the transfer to the first defendant on the ground that it had been procured by the undue influence of the second defendant. He also alleged breach of the second defendant’s fiduciary duty and breach of section 3(4) and (5) of the Enduring Powers of Attorney Act 1985, which prohibited the attorney from acting so as to benefit any person, or to make a gift to any person, other than the donor of the power. The defendants submitted, inter alia, that the transaction had initially been the claimant’s idea, that he had been advised by a solicitor, and that any presumption of undue influence was therefore rebutted.
Held: The claim was allowed.
On the evidence, a relationship existed between the claimant and the second defendant whereby the former reposed trust and confidence in the latter. The transfer to the first defendant was to the claimant’s manifest disadvantage. Accordingly, the burden of proof shifted to the defendants to prove that the transaction had not been brought about as a result of their undue influence: Royal Bank of Scotland plc v Etridge (No 2) [2001] UKHL 44; [2002] 2 AC 773 and Cheese v Thomas [1993] EGCS 149 applied.
The fact that the general basis of the transaction had initially been suggested by the claimant did not operate to rebut a presumption of undue influence in persuading the claimant to accept the transaction that had ultimately emerged. Nor did the fact that the claimant had been advised by a solicitor rebut that presumption. On the evidence, the solicitor’s advice had been flawed; he had made insufficient enquiries of the claimant and had failed to fully advise him of the insecurity of his occupation should he proceed with the transaction. The defendants had failed to rebut the presumption of undue influence and the transfer of the property was voidable.
It followed that the second defendant, in assisting on or procuring the transaction, had acted in breach of his fiduciary duty and in breach of his obligations under section 3(4) and (5) of the 1985 Act.
Roger Bartlett (instructed by Kingsfords, of Ashford) appeared for the claimant; Alexander Learmonth (instructed by Pope & Co, of Sittingbourne) appeared for the defendants.
Sally Dobson, barrister
