Leeder v Stevens

In a claim to set aside a transfer of property for undue influence, a long-standing intimate relationship may give rise to an evidential presumption where the complainant reposed trust and confidence in the other party and the transaction calls for explanation because it is manifestly disadvantageous. Actual coercion is unnecessary. Knowledge of the transaction’s legal effect is not decisive; the question is why the vulnerable party agreed and whether independent advice would have affected the decision. A trial judge must resolve material conflicts of evidence and give reasons addressing the live issues. Where an impugned transaction is set aside in equity, the court may restore the parties by treating money advanced as a loan repayable with interest, rather than by awarding a proportionate proprietary share.

The defendant owned a house subject to a mortgage. In return for paying off the mortgage, the claimant obtained a transfer of half the property into their joint names. The parties were in a long-standing intimate relationship, but the claimant did not live in the house. The defendant received legal documents from the claimant’s solicitors and signed without taking independent legal advice.

The District Judge dismissed the undue-influence case. He found no overt pressure, concluded that the defendant knew she was giving the claimant a half share, and did not resolve several material factual disputes. The defendant appealed. Carnwath LJ granted permission. The central issues were whether the evidential presumption of undue influence arose, whether it had been rebutted, and what equitable relief should follow.

1. Appeal allowed. The transfer was set aside, subject to payment of £30,000 to the claimant. The claimant was ordered to pay the defendant’s costs below and the appeal costs on an indemnity basis from 21 days after 2 September 2004, with set-off and detailed assessment provisions.
2. The Court applied the principles stated in Royal Bank of Scotland v Etridge [2002] 2 AC 773. Undue influence may arise from an abuse of influence without specific acts of persuasion. The evidential burden shifts where there is trust and confidence or ascendancy, and the transaction is not readily explicable by the parties’ relationship and calls for explanation.
3. The transaction was manifestly disadvantageous. The defendant gave away half of her principal asset and put her home at risk for £5,000. The long-standing and continuing relationship, together with her reliance on the claimant’s solicitor, established the necessary situation of possible undue influence.
4. The District Judge applied the wrong approach by looking for overt pressure or coercion. The fact that the defendant understood that she was transferring a half share did not rebut the presumption. The relevant question was why she agreed and whether, had she been fully alert to her own interests and independently advised, she would or might have declined the transaction. The presumption was not rebutted.
5. The District Judge’s decision was also inadequate because he failed to resolve material conflicts, treated both witnesses as honest without deciding which account was correct, relied largely on the claimant’s skeleton argument, and refused oral submissions. The Court considered the case unsuitable for allocation to a District Judge because it involved contested facts and the less usual subject of undue influence.
6. Restitution was to be achieved by treating the claimant’s mortgage and improvement payments as a notional loan repayable with interest. A mathematical calculation of a proportionate share was inappropriate, particularly because the claimant had not fulfilled all the associated promises concerning maintenance, insurance and improvements.

• Court of Appeal (Civil Division): [2005] EWCA Civ 50. Appeal from the decision of District Judge Singleton given on 6 May 2004. The Court allowed the appeal and set aside the transfer on terms.
• Weston-super-Mare District Judge: District Judge Singleton dismissed the defendant’s undue-influence case. The Court of Appeal held that the judgment failed to resolve material issues and applied the wrong approach.