Daniel v Drew

Actual undue influence is not confined to unlawful threats or direct coercion. The court must examine how consent to a transaction was obtained and decide whether it was the person’s free and informed choice. Vulnerability, aversion to confrontation, the other party’s forcefulness, exclusion of independent advice, and material misrepresentation may all be relevant.

A statement that a dispute may require court resolution is ordinarily legitimate. Its manner and effect may nevertheless contribute to improper pressure in exceptional circumstances. Equity does not relieve a person merely from an unwise transaction, but it will set aside a transaction procured by force, trickery or misleading conduct that overbears free volition.

The respondent, an elderly aunt and trustee of a family farm trust, sought to set aside a memorandum of resignation and a deed retiring her as trustee. She accepted that she wished ultimately to retire, but wanted her son or his representative appointed in her place. The appellant, her nephew and a continuing trustee, had pressed her to attend trustees’ meetings or retire.

His Honour Judge Weeks QC, sitting as a deputy judge of the Chancery Division, found that the appellant procured the documents by actual undue influence. He set both documents aside. The nephew appealed, contending that the relief was sterile and that the evidence did not establish overt improper pressure or coercion. The central issue was whether the aunt’s consent was procured by unacceptable means and was therefore not the product of her free will.

Appeal dismissed unanimously. Lord Justice Ward gave the judgment, with which Lord Justice Buxton and Mr Justice Wilson agreed.

1. The judge was entitled to grant relief. The aunt’s retirement without an agreed successor could materially affect the administration of the trust, the arbitration and the protection of her son’s beneficial interests. The claim was therefore not sterile.

2. Actual undue influence is not restricted to unlawful threats. Following the general approach in Royal Bank of Scotland v Etridge (No 2) [2002] 2 A.C. 773, it may be established by overt improper pressure, coercion or persuasive conduct. The first category described in Allcard v Skinner (1887) 36 Ch.D 145 included unfair and improper conduct, over-reaching and cheating.

3. The decisive enquiry in either form of undue influence is how the intention to enter the transaction was produced. The court must decide whether the influence invaded the donor’s free volition. The aunt’s vulnerability and the nephew’s forceful character were relevant facts in that enquiry. Considering vulnerability did not confuse actual undue influence with presumed undue influence.

4. A reference to court proceedings was not, without more, unlawful pressure. Its effect and the manner in which it was deployed could, however, be considered. That was particularly so where the prospect of court proceedings was raised to an elderly, vulnerable person who feared confrontation.

5. There was ample evidence of improper persuasive conduct. The appellant capitalised on an untrue statement that the aunt had already resigned, repeatedly returned with documents for signature, excluded her son and solicitors, made a crucial false statement about her inability to secure a replacement trustee, and pressed her during a distressing meeting. Those matters overbore her will. Her consent was not fairly to be treated as the expression of her free will.

6. The case concerned protection against being forced, tricked or misled, rather than relief from a merely imprudent act. The judge’s orders setting aside the memorandum and deed of retirement were upheld.

• Court of Appeal (Civil Division) In [2005] EWCA Civ 507, the court unanimously dismissed the nephew’s appeal and upheld the setting aside of the resignation documents.
• Chancery Division On 2 September 2004, His Honour Judge Weeks QC, sitting as a deputy judge, found that the aunt’s execution of the memorandum and deed of retirement had been procured by actual undue influence. He set both documents aside and granted permission to appeal.