Niersmans v Pesticcio

In a non-traditional relationship, a rebuttable evidential presumption of undue influence arises where the donor placed trust and confidence in the recipient concerning financial affairs and the transaction calls for explanation. The recipient must then provide a satisfactory explanation which establishes that the donor’s trust and confidence was not abused.

The recipient need not have committed a wrongful act, applied pressure, or exercised actual influence. Independent legal advice may rebut the presumption, but only if it is relevant and effective in freeing the donor’s judgment and enabling an informed and independent choice. The mere involvement of a solicitor does not conclusively validate a substantial gift.

Bernard Pesticcio, who had significant lifelong mental and physical disadvantages, gave his house to his sister, Maureen Niersmans, by a deed of gift. At the time, she managed aspects of his financial affairs and had been appointed his attorney. A solicitor acted in connection with the deed, an enduring power of attorney and a will.

In the Chancery Division, Neuberger J held that the deed had been procured by presumed undue influence and was void as against Maureen. He found that Bernard had trusted and confided in her, that the gift lacked a satisfactory explanation, and that the solicitor’s advice was not independent or effective enough to rebut the presumption.

Maureen appealed only the finding of undue influence. The central issue was whether the solicitor’s involvement and Bernard’s mental capacity necessarily provided a satisfactory explanation for the gift.

Decision

1. The appeal was dismissed unanimously. Lord Justice Mummery held that Neuberger J had correctly stated and applied the law of presumed undue influence. Lords Justices Jacob and Pill agreed.
2. Where a donor has placed trust and confidence in a recipient in relation to financial affairs, and a substantial transaction calls for explanation, the evidential burden shifts to the recipient to provide a satisfactory explanation. The finding that Bernard had entrusted his affairs to Maureen, together with the transfer of his principal asset, entitled the judge to apply that presumption.
3. The doctrine does not depend on proof that the recipient committed a dishonest, wrongful or otherwise reprehensible act. It operates as a matter of public policy to prevent the influence inherent in a relationship of trust and confidence from operating to the donor’s disadvantage without a satisfactory explanation. Bernard therefore did not have to prove that Maureen actually exerted influence or pressure in obtaining the deed.
4. Advice from an independent qualified person can rebut the presumption if the transaction’s nature and effect have been fully explained. However, a solicitor’s participation is not decisive. The court must be satisfied that the advice was relevant and effective in freeing the donor’s will and enabling an informed, independent judgment. On the unchallenged findings, the solicitor had not adequately explained Bernard’s options, the disadvantages of the gift, or the absence of legal protection for him or his mother, and had not properly addressed undue influence.
5. The explanations advanced for the gift did not satisfactorily account for Bernard’s transfer of more than 90% of his assets. The first-instance declaration that the deed was void as against Maureen therefore stood.

• Court of Appeal (Civil Division): By [2004] EWCA Civ 372, dismissed Maureen Niersmans’s appeal and upheld the finding of presumed undue influence.
• High Court, Chancery Division: Neuberger J, on 11 April 2003, declared the deed of gift void as against Maureen Niersmans. Claims against the subsequent purchaser and mortgagee were rejected and were not appealed.