Hogg v Hogg & Anor

Undue influence is concerned with whether a transaction resulted from an abuse of influence, assessed by examining how the intention to transact was produced. A relationship of trust and confidence, together with a transaction requiring explanation, may create a rebuttable evidential presumption. The burden remains on the claimant unless that presumption arises. A transaction need not disadvantage the alleged victim, although the absence of disadvantage may make the claim harder to establish. Independent advice is relevant but is not conclusive. The court also confirmed that an alleged oral employment agreement must be proved as a binding contract; proposals and incomplete negotiations do not establish entitlement to higher remuneration.

Roger Hogg brought two actions. In the first, he challenged transactions by which his father, William Hogg, removed him as trustee and excluded him from benefit under two settlements, alleging want of capacity and undue influence by his sister Anita. The capacity claim was abandoned. In the second, Roger claimed unpaid remuneration from Otford Tool & Gauge Co Ltd, which counterclaimed for sums said to be due on his director’s loan account. The central issues were whether the trust transactions resulted from undue influence and whether Roger had established any contractual entitlement to remuneration exceeding the amount paid.

1. Undue influence. Applying the guidance in Royal Bank of Scotland plc v Etridge (No. 2) [2001] 3 WLR 1021, the court held that the relevant inquiry was whether Anita had abused an influence or ascendancy over William in procuring the impugned transactions. Trust and confidence could be accepted, but the transactions were readily explicable by ordinary motives in the circumstances, including William’s concern about the future of the family company and his distrust of Roger’s association with Sir Simon Stracey.
2. The evidential burden therefore did not shift to Anita. The transactions caused William no disadvantage, and there was insufficient evidence that Anita had exercised or abused dominance. Even if an irrebuttable presumption of influence could arise in the case of an elderly parent dependent on a child-carer, the evidence did not establish abuse. The undue influence claim was dismissed.
3. The want-of-capacity claim was abandoned. On the evidence, the court would in any event have found no relevant lack of capacity when William entered into the transactions.
4. Remuneration. The formal provisions governing directors’ remuneration and employment did not establish a higher contractual entitlement. The evidence showed remuneration at £3,500 net per month, but no binding oral or written agreement for the higher remuneration and additional benefits claimed. Negotiations proceeded on the footing that no higher contract would arise until written terms had been agreed and approved. The Employment Rights Act 1996 did not transform the existing arrangement into a contract on the claimed terms.
5. The remuneration claims failed. On the counterclaim, Roger was not liable for approximately £29,500 because he was not shown to have known of or participated in procuring the payment. Other disputed loan-account items required a properly directed account, with notices of surcharge and falsification if pursued.