Options and grant of tenancies — Whether undue influence — Whether harsh and unconscionable bargains — Whether joint venture agreement — Joint venture failing — Property interests held in trust for plaintiff landowner
In January 1987 the plaintiff owned and farmed some 250 acres in Cornwall; he also farmed Coombe Lynher Farm which was owned by his mother. In early 1987 the plaintiff’s financial position was desperate and, in order to raise money, he entered into a number of transactions with the defendant: (1) he sold his agricultural machinery to the defendant for half its value on payment of annual rent equal to half the price; (2) he granted an option to purchase the freehold land for half its value on certain terms; (3) he granted a rent-free agricultural tenancy, to the defendant’s son, of the agricultural land; and (4) he granted the defendant a rent-free subtenancy of his mother’s farm. The plaintiff alleged that the parties were to set up a joint venture involving cattle embryo transplanting using a shed on one of the farms and the plaintiff’s land for grazing. The plaintiff contended that the transactions ought to be set aside on the grounds of undue influence alternatively that they represented an unconscionable bargain. The defendant denied any joint venture with the plaintiff.
Held 1. The defendant did not become the plaintiff’s financial adviser and no relationship of confidence existed by which undue influence could arise.
2. Although the transactions appeared imprudent they could not be set aside on the basis of harsh and unconscionable bargains: see Willis v Jernegan (1741) 2 Atk 251 and Alec Lobb (Garages) Ltd v Total Oil (GB) Ltd [1985] 1 WLR 173 followed.
3. The purpose and effect of the transactions therefore had to be ascertained. On the evidence a joint venture had been proposed with the plaintiff’s contribution being the free use of his land and equipment. The defendant and his son did not intend to take a beneficial interest as a result of the transactions which were merely temporary receptacles to keep the assets out of reach of the plaintiff’s creditors until they could be made available for the joint venture. The joint venture failed: accordingly all the property interests created or transferred to the defendant or his son were created or transferred for a purpose which failed and are now held in trust for the plaintiff. The options are not exercisable and the tenancies are held in trust.
Ulick Staunton (instructed by Burges Salmon, of Bristol) appeared for the plaintiff; and Hubert Picarda (instructed by Woolcombe & Yonge, of Plymouth) appeared for the defendants.
