Malik v Shiekh

A presumption of undue influence may arise where a transaction is seriously disadvantageous and inexplicable, and the claimant was vulnerable to influence, dependency or control. The inquiry is not confined to proof that the claimant reposed trust and confidence in the alleged influencer. The nature and effect of the transaction may inform both whether it calls for explanation and whether a relationship of influence existed. On a jurisdictional issue, the First-tier Tribunal may transfer land-registration objection proceedings to the County Court under its general procedural power where the County Court has jurisdiction and the specific statutory power to direct fresh proceedings is not inconsistent with transfer.

The claimant transferred two properties into joint names with the respondent. The transfers were intended by the claimant’s sons to provide security for lending to their company, although the claimant was not party to, and was not shown the terms of, the agreement governing that security. The First-tier Tribunal referred the land-registration dispute to the County Court, which proceeded using the existing statements of case. HHJ Parfitt upheld the transfers but held that they operated only as security, rejecting the claimant’s primary undue-influence case and her jurisdictional objection.

The claimant appealed against the findings on undue influence and jurisdiction. The central issues were whether the transaction called for an explanation, whether the evidence established a relationship of influence, and whether the First-tier Tribunal had power to transfer the proceedings without fresh originating process.

1. Undue influence. The appeal was allowed. The governing principles were those stated in Royal Bank of Scotland plc v Etridge (No 2), including that a relationship of influence may arise from dependency and vulnerability and does not require proof of trust and confidence. The appellate court’s intervention on factual evaluation was subject to the high threshold described in Assicurazioni Generali SpA v Arab Insurance Group and Estrada v Al-Juffali.
2. The judge below materially misunderstood the transaction. The transfers were unqualified transfers of half the freehold interests. The claimant was not party to the February 2013 agreement, could not enforce it directly, and was left dependent on her sons to protect her ownership. The transaction therefore materially disadvantaged her and called for an explanation.
3. The nature of the transaction was relevant to the relationship-of-influence inquiry. The claimant’s age, infirmity, immobility, inability to understand written English, dependence on her sons for information, and lack of direct interest in the company established vulnerability in dealings undertaken for the benefit of the company and her sons. The judge below had placed excessive weight on absent evidence and had asked too narrow a question by focusing on positive evidence of trust and confidence.
4. The circumstances established a relationship of influence and a transaction calling for explanation. A presumption of undue influence therefore arose. Since the judge had already found that the respondent would not have rebutted that presumption, the transfers were tainted by undue influence and were set aside. Later Companies House material did not itself prove a relationship of influence at the relevant time.
5. Jurisdiction. The jurisdictional appeal was also allowed in substance, but the challenge failed. Sections 73(7), 110(1), 46 and 132(3)(a) of the Land Registration Act 2002, read with rules 2 and 6(3)(n) of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013, permitted the First-tier Tribunal to transfer the proceedings to the County Court. The statutory power to direct a party to commence court proceedings did not exclude the general power to transfer the existing proceedings.
6. Fresh originating process was unnecessary. Transferred proceedings could retain their existing statements of case and receive a new court reference. The court expressed no conclusion on whether the absence of originating process could alternatively be remedied under CPR rule 3.10.

• High Court (Chancery Division) — The appeal from HHJ Parfitt’s County Court judgment was allowed on the undue-influence issue. The transfers were set aside. The jurisdictional challenge was rejected.
• Central London County Court — On 6 April 2017, HHJ Parfitt rejected the jurisdictional objection, upheld the validity of the transfers, but held that they operated only as security.
• First-tier Tribunal (Property Chamber) — The land-registration dispute was transferred to the County Court after the claimant lost capacity. The existing statements of case were directed to stand in the County Court.