Hammond v Osborn & Anor

Where a relationship of trust and confidence and a transaction calling for explanation establish a presumption of undue influence, the donee must prove that the gift resulted from the donor’s full, free and informed thought and independent will.

Capacity, understanding, intention, absence of solicitation or proved actual pressure, and the donee’s apparently proper conduct do not by themselves rebut the presumption. Independent legal advice is not indispensable, but the donor must otherwise be fully informed of the gift’s nature and effect, including its size, financial consequences, future needs and tax liabilities.

Hammond v Osborn & Anor concerned a gift of £297,005 made by Dennis Pritler, an elderly and physically dependent man, to Susan Osborn, a neighbour who had begun caring for him. The gift represented nearly all his liquid assets. He was not advised of its amount, effect, future implications or tax consequences.

After Pritler’s death, his administrator, Margaret Hammond, challenged the transaction. Mr Justice Mackay found that Pritler intended to make an outright gift but dismissed the claim based on presumed undue influence. The appeal concerned whether the gift was sufficiently explained by proof of a free and independent will.

Appeal allowed. The Court of Appeal was unanimous. Sir Martin Nourse delivered the leading judgment, Lord Justice Keene agreed with both judgments, and Lord Justice Ward gave separate supporting reasons.

1. Nature of the presumption. The relationship of trust and confidence and the size of the gift were conceded to be sufficient to raise the presumption. The doctrine operates on public-policy grounds. It does not require proof that the donee committed a wrongful act or actually exercised influence. Once raised, the evidential burden lies on the donee to provide a satisfactory explanation.
2. Rebuttal test. The donee had to prove that the gift was made only after full, free and informed thought and was the result of the donor’s independent will. It was insufficient that Pritler understood the transaction, had sufficient capacity, intended the gift, had considered it for some time, or was not shown to have acted on any solicitation or actual pressure.
3. Independent advice and informed decision-making. Independent legal advice is not invariably necessary, but independent advice or an equivalent explanation is usually crucial. The donor must appreciate the nature and effect of the transaction. That required consideration of the gift’s amount, its proportion of Pritler’s liquid assets, what would remain for his future needs, and the substantial tax liability created by realising the investments.
4. Application. Pritler was left with limited cash, a house and pension income, while facing a foreseeable tax liability. Neither Osborn nor her son gave him any advice or explained the scale and consequences of the gift. Osborn’s intention to care for him, the absence of proved solicitation, and Pritler’s affection and gratitude did not establish independence. His post-death concealment and falsehoods were also inconsistent with an unimpeachable transaction, although the appeal did not depend solely on that conduct.
5. The judge’s finding that Pritler intended an outright gift was supported by the evidence and his assessment of Osborn’s credibility, so the Court of Appeal did not disturb it. However, the presumption of undue influence had not been rebutted. The gift was set aside. Counsel were directed to lodge an agreed minute of order.

• Court of Appeal (Civil Division): In Hammond v Osborn & Anor [2002] EWCA Civ 885, the appeal was allowed and the gift was set aside.
• Queen’s Bench Division: Mr Justice Mackay found that the deceased intended to make an outright gift but rejected the claim based on presumed undue influence and dismissed the action with costs.