Tajleena Islam v Sultana Jahan Islam & Ors

A sham requires a common intention among all relevant parties that documents should create the appearance of rights different from those actually intended, together with an intention to mislead. An improper motive, including protecting assets from creditors, does not itself make a transaction a sham. Where illegality is engaged, the court must consider the purpose of the prohibition, other relevant public policies and proportionality.

Undue influence may be proved by actual pressure or inferred from a relationship of influence and a disadvantageous transaction requiring explanation. Once the inference arises, the evidential burden shifts, although the legal burden remains on the claimant. A transaction which defeats the parties’ agreed arrangement and whose effect the claimant did not understand may be set aside where the inference is not rebutted.

The claimant, the daughter of Mohammed Islam, claimed beneficial interests in six properties. She alleged that one transfer had been forged and that various declarations of trust and transfers had been procured by undue influence. Her mother and brother denied the allegations and contended that the trust documents were shams created to conceal Mohammed’s assets from creditors.

The court considered the authenticity of disputed signatures, whether the relevant declarations of trust were shams, and whether the August 2006 deed, the 2016 deeds and the 2017 transfers were procured by undue influence.

1. Forgery. On the balance of probabilities, the claimant’s signatures on the disputed documents, including the 2008 Fellows Court transfer, were forged. The 2008 transfer was therefore invalid. The court preferred the handwriting evidence of Mr Cosslett, while emphasising that expert opinion remains evidence for the court to evaluate.
2. Sham. Applying Snook v London & West Riding Investments Ltd [1967] 2 QB 786 and the authorities concerning sham trusts, the relevant inquiry was whether the parties intended both that the assets should be held on different terms from those expressed and that others should be misled. The necessary intention had to be shared by all parties, or arise through reckless indifference by a trustee. Subsequent conduct could be considered as evidence of original intention.
3. An improper motive to protect assets from creditors did not establish a sham. The pre-2006 declarations were intended to transfer beneficial ownership to the claimant and her mother, even though asset protection was a motive. The post-2006 declarations were likewise genuine. The allegations of sham therefore failed.
4. The illegality doctrine did not arise because no sham was established. The court nevertheless explained that, under Patel v Mirza [2016] UKSC 42, the consequences of illegality require consideration of the purpose of the prohibition, other relevant public policy and proportionality.
5. Undue influence. Applying Royal Bank of Scotland plc v Etridge (No 2) [2002] 2 AC 773, actual undue influence consists of improper pressure or coercion. Presumed undue influence arises where a relationship of influence is established and the transaction is disadvantageous and calls for explanation. The legal burden remains on the claimant, but the evidential burden shifts to the defendant.
6. The August 2006 deed and the 2016 deeds did not call for explanation in the relevant sense. The claimant understood the former and willingly signed the latter to protect the properties from the consequences of her troubled relationship. Those claims therefore failed. By contrast, the 2017 transfers defeated the arrangement under which the claimant expected to inherit interests from her parents and created beneficial joint tenancies, with the consequence that survivorship defeated the intended testamentary gifts. The transactions were disadvantageous and their effect was not understood. The inference of undue influence was not rebutted.
7. The 2017 transfers were set aside for undue influence. The court reserved consequential matters, including accounts, costs and the form of the final order.

First-instance decision. Consequential matters, including the form of order, accounts and costs, were reserved for a further hearing.