Curtis & Ors v Pulbrook & Anor

A fiduciary agent with authority to operate a principal’s account may make payments for the agent’s own benefit only with the principal’s informed consent. Where the agent manages the principal’s financial affairs and obtains a gratuitous transaction substantially benefiting the agent, presumed undue influence may arise. The presumption requires proof of a relationship of influence and a transaction that calls for explanation. It is not rebutted merely by showing that the principal understood the document or that the agent gave a warning. Independent legal advice is ordinarily the clearest means of rebuttal, particularly where the transaction is manifestly disadvantageous.

A longstanding course of substantially similar payments may establish informed consent to an agent’s remuneration. A settlement cannot release claims belonging to a person who was not a party to it.

The claimants, acting as executors of Arthur Towns’ estate, sought repayment of seven payments made by Richard Pulbrook from a joint bank account. The payments comprised sums applied to legal fees under indemnities given by Arthur Towns and Edith Towns, and two payments said to represent Pulbrook’s management fees.

The principal issues were whether the indemnities authorised the payments, whether the money belonged to Arthur or Edith’s estate, whether Arthur had capacity to bring the proceedings, and whether the fee payments were authorised by agreement or course of dealing. Pulbrook also relied on a prior mediation settlement.

1. Capacity. The court was satisfied that Arthur Towns had capacity and acted freely when instructing solicitors. Even if he had become a protected party before the appointment of a litigation friend, the court would have regularised the proceedings retrospectively under CPR rule 21.3(4), since the claims were properly brought, pursued in good faith and financially advantageous to him.
2. Arthur’s indemnity payments. Pulbrook was a fiduciary agent. He therefore needed informed consent before using Arthur’s money to discharge his own liabilities. The March 2006 letter and deed were transactions that called for explanation and were manifestly disadvantageous to Arthur. Pulbrook stood in a relationship of influence, and the presumption of undue influence arose. His warnings and alleged explanation were insufficient to rebut it, especially as Arthur received no independent legal advice. The indemnity documents were set aside in equity.
3. Edith’s indemnity payments. The 1994 declaration governing ownership of the joint account had not been varied. The relevant funds belonged to Arthur at Edith’s death. Pulbrook could not therefore rely on Edith’s indemnity or Arthur’s invalid indemnity. The court also held, on the alternative assumption that Edith’s estate owned the money, that Edith’s indemnity was unenforceable for want of consideration.
4. Fee payments. The two payments to Pulbrook were authorised. They formed part of a longstanding arrangement, supported by repeated substantially similar payments and reports accepted by the Towns.
5. The mediation agreement did not settle Arthur’s claims because he was not a party to it. Judgment was therefore given for the claimants on both categories of indemnity payment and for Pulbrook on the fee payments. Consequential orders and costs were left for written submissions.

First-instance decision. The judgment records no appeal or earlier decision in this litigation.