Brown v Stephenson

Undue influence requires proof that the transaction was procured by improper pressure or by abuse of a relationship of influence. A presumption may arise where trust and confidence in relation to financial affairs is combined with a transaction calling for explanation, but it may be rebutted by evidence that the transaction was the free and informed exercise of the claimant’s will.

Independent legal advice is relevant to rebuttal, although the court must assess all the circumstances. Formal documents should generally be given substantial weight when determining whether a partnership has ended. A contract for partition is unenforceable where the boundaries of the proposed properties remain undefined and the statutory formalities are not satisfied.

The claimant and defendant entered into a partnership concerning land and a business. The claimant later transferred interests in the land into joint names and transferred the Paddock and Woodland into the defendant’s sole name. She alleged that those transactions, and her retirement from the partnership, resulted from undue influence.

The defendant sought specific performance of a later agreement under which Capri Lodge was to be divided equally. The central issues were whether the transfers should be set aside, when the claimant retired from the partnership, and whether the later agreement created an enforceable contract for partition.

1. Undue influence. The claim to set aside the 2003 Declaration of Trust and transfers failed. There was no evidence of pressure in 2003, the claimant was commercially experienced and not dependent on the defendant for financial affairs, and the transaction was reasonably explained by the parties’ commercial partnership. The defendant had also materially acted to his detriment by carrying out substantial works and incurring expenditure.
2. In relation to the 2005 transfers, the claimant’s financial difficulties and the more strained relationship did not establish coercion or undue influence. The circumstances also did not give rise to a presumption. Even if a presumption arose, it was rebutted by the solicitor’s independent advice, his private meeting with the claimant, and his satisfaction that she understood and wished to proceed. The claim based on undue influence was therefore rejected.
3. Retirement. The court gave considerable weight to the formal Notice of Retirement, the surrounding solicitor’s records, the claimant’s diary, and the parties’ conduct. Continuing limited business activity and the later closure of a bank account did not displace the document. The claimant retired on 21 January 2005.
4. Partition contract. The 2009 agreement was incomplete because it did not provide a means of determining the boundaries between the proposed properties. It also failed to satisfy section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. The counterclaim for specific performance therefore failed.
5. The court declined to order partition under the Trusts of Land and Appointment of Trustees Act 1996. Partition had not been pleaded, and the court had not heard evidence on matters including valuation and the effect of the planning restriction. An order might operate unfairly against the claimant.