Undue influence — Presumption — Claimant purchasing under right-to-buy legislation and obtaining discount — Defendant responsible for payments under mortgage — Trust deed giving defendant 100% beneficial interest in house on sale — Whether transaction requiring explanation — Claim allowed
The claimant purchased her council house in 1989 under the right-to-buy provisions of Part V of the Housing Act 1985, receiving a 60% discount on the agreed value by virtue of her long tenure. She borrowed the entire purchase price on a building society mortgage, and her son, the defendant, assumed the burden of repaying the loan. On the day of completion, the claimant executed a trust deed, the effect of which was that any sale of the house would require the consent of both her and the defendant, and that the proceeds of sale would belong to the defendant.
The claimant subsequently brought proceedings seeking to set aside the trust deed on the ground, inter alia, that it had been obtained by undue influence, which she submitted, was to be presumed. It was accepted that the first element required for such a presumption to arise had been fulfilled, since she had reposed trust and confidence in the defendant. However, the defendant disputed the second element, namely whether the transaction was readily explicable by the relationship between him and the claimant. He also contended that the claim was barred under the doctrine of laches because of the delay between the signing of the deed in 1989 and the bringing of the claim in 2002.
Held: The claim was allowed.
In all the circumstances of the case, the transaction effected by the trust deed called for an explanation from the defendant. The transaction was very beneficial for the defendant, since, at a cost of 40% of the value of the house, he had obtained a reversionary interest of 100%. By contrast, the benefits to the claimant were not obvious. Although she would have no further obligation to pay rent, this was of marginal benefit to her, since this had previously been covered by her housing benefit. Her previous security of tenure became dependent upon the defendant honouring his mortgage obligations, and, in the event of a default and sale by the mortgagee, any net proceeds of sale would belong to him alone. The 60% discount was, in effect, the claimant’s contribution towards the purchase price, and, even though the benefit of the discount could not be unlocked without the defendant’s assistance, fairness did not demand that he should enjoy the whole of that benefit. It followed that a presumption of undue influence arose, which the defendant had not, on the evidence, succeeded in rebutting: Popowski v Popowski [2004] EWHC 668 (Ch); [2004] PLSCS 77 considered. Nor was the defence of laches made out. The relevant period of time ran only from 1998, since, on the evidence, it was not until then that the claimant had come into possession of a copy of the trust deed; her delay of four years following that date was not evidence of any acquiescence in the regime imposed by the deed.
Josephine Hayes (instructed by Pumfrey & Lythaby, of Orpington) appeared for the claimant; Rupert D’Cruz (instructed by Weil, Gotshal & Manges) appeared for the defendant.
Sally Dobson, barrister
