Undue influence — Contract for transfer of property from daughter to father — Appellant arguing that presumption of undue influence arising — Whether transaction explicable by ordinary motives — Appeal dismissed
The first appellant and her husband let a leasehold residential property to the respondent (the first appellant’s father). The parties entered into an agreement under which the property would be transferred to the respondent, who would, in return, make an immediate payment to the appellants and take over the mortgage repayments. The transfer was not to be completed until the mortgage had been discharged.
Several years later, when the respondent had fulfilled his financial obligations, he brought proceedings seeking to enforce the agreement. By that date, the first appellant had become the sole registered proprietor. By their defence, the appellants argued that the transaction raised a presumption of undue influence. They relied upon the fact that the property had not been valued, and that none of the parties had considered the value, as rendering the transaction sufficiently unusual as to call for an explanation. They submitted that the respondent had clearly given no thought to whether the price paid was reasonable and fair to both parties. However, they did not claim that the sale was at an undervalue.
Rejecting those arguments, the judge held that the fact that no one had looked at the value of the property did not self-evidently suggest undue influence. He took the view that the purpose of the transaction had been to alleviate the difficulties that the appellant and her husband were experiencing in meeting the mortgage payments. Although the judge found that a relationship of trust existed between the parties, he concluded that the transaction was explicable by the ordinary motives of people in their situation, and that no presumption of undue influence therefore arose. The appellant appealed.
Held: The appeal was dismissed.
In order to raise a presumption of undue influence, it was necessary to establish that the parties enjoyed a relationship of trust and confidence, usually arising from a historic relationship that preceded the impugned transaction. There could, however, be cases where the relationship arose out of the circumstances of the transaction. Next, the transaction would have to call for an explanation that was not forthcoming. If the transaction was not explicable by the ordinary motives of people in the parties’ situation, it would be for the respondent to show that the position of trust had not been abused: Royal Bank of Scotland v Etridge (No 2) [2001] UKHL 44; [2002] 2 AC 773 and Macklin v Dowsett [2004] EWCA Civ 904; [2004] 2 EGLR 75 applied. The fact that a transaction was unusual did not of itself mean that it called for an explanation. The judge had been entitled to find that the transaction in the present case was explicable by ordinary motives and that no presumption of undue influence arose. Nor had he fallen into the trap of weighing the advantages and disadvantages of the deal; he had done no more than fairly noting the context of the transaction. In order to determine whether a transaction was inexplicable other than on the basis of undue influence, it was necessary to look at that transaction in context, and to consider what it had intended to achieve and how it had been viewed by the parties.
David Rees (instructed by Radcliffes Le Brasseur) appeared for the appellants; Richard Clegg (instructed by KSB Law) appeared for the respondent.
Sally Dobson, barrister
