Proctor v Proctor

Setting aside a gift procured by undue influence re-vests the equitable title to the gifted money in the claimant or estate. Where the money has been applied to acquire property, the claimant may trace it into that property and seek an equitable lien or other proprietary remedy. The availability of that remedy is not excluded merely because the claimant previously obtained a monetary judgment, particularly where the order contemplated security and reserved permission to apply. A deferred payment date does not necessarily postpone interest. Unless the court orders otherwise, interest runs from judgment under CPR 40.8; the benefit of time given to the debtor may justify interest accruing during the period of indulgence.

The claimant, the deceased’s daughter and personal representative, had previously succeeded in setting aside three monetary gifts made by the deceased to the defendant on the ground of undue influence. The gifted money had been applied towards the purchase of a Spanish property. The court had awarded the claimant £123,000, representing the relevant proportion of the property’s value, deferred enforcement for two years, and reserved permission to apply concerning security and interest.

The defendant subsequently transferred her interest in the property to her sons. The claimant applied for a declaration that she was entitled to trace £123,000 into the property and to an equitable lien, together with interest from the date of the original judgment. The central issues were whether a tracing remedy remained available after the monetary judgment and whether interest ran during the deferred-payment period.

1. Tracing remedy. The gifts had been set aside and the equitable title to the money had re-vested in the deceased’s estate, represented by the claimant. The remedies available after undue influence are flexible and must be moulded to achieve practical justice. The claimant therefore had a sufficient equitable title to trace the money into the property purchased with it.
2. Equitable lien. The decision in Cheese v Thomas [1994] 1 WLR 129 did not prevent a tracing remedy where money obtained by undue influence had been used to purchase property. The claimant could elect between proprietary remedies, including an equitable lien for the value of the money applied to acquire the asset. The lien was fixed at £123,000.
3. No irrevocable election. The earlier monetary judgment did not amount to an irrevocable election excluding a proprietary remedy. The order expressly recorded the use of the £190,000 towards the property and contemplated security. Properly construed, the permission to apply extended to an application for an equitable lien. The declaration was made as between the claimant and defendant for the period beginning 18 May 2010 and continuing at least until 25 September 2010. The effect against the sons was left to the separate proceedings.
4. Interest. Under CPR 40.8 and section 17 of the Judgments Act 1838, interest ordinarily ran from judgment because the court had not ordered otherwise. The defendant’s payment obligation had been deferred as an indulgence, while she retained the property and benefited from any increase in its value. Interest therefore ran from 18 May 2010 at the statutory rate.
5. The claimant succeeded on the application. The defendant was ordered to pay the application costs, subject to detailed assessment, with provision for mutual set-off of outstanding costs.

The judgment followed two earlier first-instance judgments delivered by the same judge on 11 and 18 May 2010. The undue influence claim had succeeded and the defendant’s application under the Inheritance (Provision for Family and Dependants) Act 1975 had been dismissed. No appeal had been brought from those decisions. The present application concerned security, tracing and interest under the order subsequently sealed on 12 January 2011.