Jennings & Anor v Cairns

In a relationship-based undue-influence claim, the evidential burden shifts to the donee where the donor reposed trust and confidence in the donee, or the donee acquired ascendancy, and the transaction calls for explanation. The court must then assess all the evidence. The donee may rebut the inference by showing that the donor acted with full, free and informed will.

Independent advice is relevant but not conclusive. A material mistake about the effect of a transaction or its fiscal consequences does not itself rebut the inference where the mistake is bound up with the donee’s influence. Innocent or unimpeachable conduct by the donee is not, without more, a defence.

An elderly testatrix made substantial transfers to trusts for the education of her great-nieces and paid school fees. Her niece, Penelope, was closely involved in her affairs and later operated an Enduring Power of Attorney. The trusts did not permit the testatrix to revoke them or benefit from them, contrary to what she had been told.

His Honour Judge Rich QC held that the gift of £171,694 had been procured by undue influence. He ordered Penelope personally to make equitable compensation to the estate. Penelope appealed, contending that no finding of undue influence had been made and that the deceased had acted freely despite her mistaken understanding of the trusts and their tax consequences.

The central issue was whether the circumstances raised, and Penelope had failed to rebut, the evidential presumption of undue influence.

Undue influence

1. Appeal dismissed unanimously. Lady Justice Arden held, with whom Lord Justice Dyson and the Master of the Rolls agreed, that the judge had been entitled to find undue influence in respect of the £171,694 gift.

2. The court applied the approach in Royal Bank of Scotland v Etridge [2002] 2 AC 773. A claimant establishes a prima facie case by proving a relationship of trust and confidence or ascendancy, and a transaction which calls for explanation. That shifts the evidential burden to the donee, although the court must ultimately make a balanced assessment of all the evidence and the legal burden remains on the claimant.

3. The judge had found a relationship that enabled Penelope to take unfair advantage of Enid. The size of the gift, its tax consequences, Enid’s age and health, and the absence of advice directed to her needs justified the implicit finding that the transaction called for explanation. Penelope therefore had to show that it was Enid’s full, free and informed act.

4. She did not do so. Advice from an independent adviser is a relevant part of the overall assessment, not an automatic answer. Nor did Enid’s material mistake about the trusts and their fiscal effects sever the connection between the gift and Penelope’s influence. Enid would not have made the gift had she understood that she could neither revoke the trusts nor benefit from them. The mistake was not independent of the influence and did not rebut the inference.

5. It was immaterial that Penelope was innocent of the mistaken advice and did not herself understand the tax consequences. Unimpeachable conduct does not by itself answer a relationship-based undue-influence claim. The court did not decide any general question concerning the availability of a personal compensation order instead of setting aside the transactions, as that point was not argued.

The appeal was dismissed with costs assessed at £12,000, payable within 28 days. Permission to apply for leave to appeal to the House of Lords was refused.

• Court of Appeal (Civil Division) [2003] EWCA Civ 1935: dismissed Penelope Cairns’s appeal. Lady Justice Arden gave the judgment; Lord Justice Dyson and the Master of the Rolls agreed.

• High Court, Chancery Division: His Honour Judge Rich QC held that the £171,694 gift was affected by undue influence and ordered Penelope to make equitable compensation to the estate.