Vale v Armstrong & Anor

A transaction procured by undue influence is voidable where a relationship of trust and confidence exists and the transaction is objectively manifestly disadvantageous or not readily explicable by the relationship. The second requirement is assessed objectively, having regard to the parties, transaction, circumstances and surrounding facts. Independent legal advice is relevant but does not automatically rebut the inference of undue influence; its weight depends on its quality and scope. Where an attorney uses an enduring power of attorney to procure a transaction benefiting another person, the transaction may also involve breach of fiduciary and statutory duties.

Henry Thomas Vale sought to set aside the transfer of his house to his great-nephew, Jason Armstrong. The transfer was executed by Jason’s father, Terence Armstrong, under an enduring power of attorney. Mr Vale alleged undue influence, breach of fiduciary duty and breach of the restrictions governing attorneys under the Enduring Powers of Attorney Act 1985.

The property was transferred at a substantial undervalue on the understanding that Mr Vale could remain there rent-free for life. That arrangement was not recorded in writing. The central issue was whether the transaction had been procured by undue influence and, if so, what consequences followed.

1. Undue influence. The governing principles were those stated by Lord Nicholls in Royal Bank of Scotland plc v Etridge (No 2) 2002 2 AC 773. Undue influence protects against abuse of influence, including exploitation of trust, confidence or vulnerability. Proof that the claimant reposed trust and confidence in the defendant, together with a transaction calling for explanation, will ordinarily shift the evidential burden.
2. The second requirement, described here as manifest disadvantage, is an objective test. It requires consideration of the parties, the transaction, their respective circumstances and the surrounding facts. The transaction was manifestly disadvantageous because Mr Vale surrendered his only substantial asset for an insecure lifetime occupation, lacked resources to move if circumstances changed, and depended on a continuing co-operative relationship with Jason.
3. The fact that Mr Vale initially suggested a sale, or received advice from a solicitor, did not rebut the inference. The advice was inadequate because it did not secure a written record of the occupation agreement, investigate Mr Vale’s financial circumstances and family relationship, or explore alternative arrangements. Independent advice must be assessed according to its quality and effect in the circumstances.
4. The defendants failed to rebut the presumption. The transfer was therefore voidable and was set aside. Terence Armstrong had acted in breach of fiduciary duty and in breach of his obligations as attorney under section 3(4) or (5) of the Enduring Powers of Attorney Act 1985. Jason was aware of the relevant circumstances.
5. The court deferred final consequential orders because the interests of Birmingham Midshires might be affected. The judgment was to be sent to Birmingham Midshires, which was to have the opportunity to attend, seek joinder and make submissions.

First-instance decision. No prior appellate decision is stated in the judgment.