Summary
A substantial payment by an older family member is not recoverable as a loan merely because the payer later describes it as repayable. The court must determine the parties’ intentions and any agreed terms from the evidence, giving appropriate weight to contemporaneous documents and the absence of evidence from a key witness.
A signed declaration will not be a sham unless all parties shared an intention that it should create rights and obligations different from those it appeared to create. Non est factum requires proof that the signer was misled as to the essential character or effect of the document and did not fail to take reasonable steps to ascertain its general effect. Undue influence requires an identified transaction obtained by influence; a family relationship alone does not establish the evidential presumption.
Factual background
Robert Stokes, aged 90, claimed repayment from his grandson Sebastian Stokes and Sebastian’s wife Olivia of payments totalling £864,722. He alleged that the payments, including £727,086 used towards the purchase of Fernleigh Mount, were loans made for property investment and repayable when the property was sold.
The defendants contended that the payments were gifts. Robert relied on a later written agreement stating that £864,000 had been temporarily loaned for the purchase of Fernleigh Mount. He also challenged a declaration of gift signed before completion, alleging sham, non est factum, misrepresentation and undue influence. The issues included the effect of the written agreement and whether Olivia was bound by it.
Held
- Evidence and burden of proof. Robert’s witness statement was admitted as hearsay, but its weight was reduced because he could not be cross-examined on the central discussions and his evidence did not explain the alleged loan terms. The claim remained Robert’s to prove on the balance of probabilities. Mr Dungworth’s untested evidence was given no weight beyond the documents to which it referred.
- Nature of the payments. Robert proved payments of £727,086 towards Fernleigh Mount, but not an agreement that the money was repayable. The contemporaneous documents described the payment as a gift, while the later written agreement was inconsistent with Robert’s case because it included wedding and other payments not shown to have been property loans. The Fernleigh payment and the remaining claimed sums were gifts. The claim also failed because the pleaded total of £864,722 exceeded the schedule total of £850,222.
- Declaration. Applying Snook v London and West Riding Investments Ltd [1967] 2 QB 786, the declaration was not a sham: there was no evidence of a common intention by all parties to create an appearance of rights different from their actual intentions. Applying Saunders v Anglia Building Society [1971] AC 1004, Robert had not shown that he was misled as to the essential character or effect of the document, and he had failed to take reasonable steps to ascertain its general effect.
- Misrepresentation and undue influence. The declaration was relied on only as evidence of an earlier gift or loan agreement, not as a contract induced by a misrepresentation. The undue influence claim also failed because the relevant transaction was the earlier advance, not the declaration; the relationship did not fall within a class giving rise to an irrebuttable presumption, and no actual influence was proved.
- Written agreement and duress. The later agreement did not establish the terms of the original transaction. Sebastian’s evidence did not satisfy the requirements of lawful-act economic duress identified in Times Travel (UK) Ltd v Pakistan International Airline Corp [2021] UKSC 40: there was no absence of practical choice and no reprehensible or unconscionable pressure.
- Disposition. The claim was dismissed.
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Appellate history
First instance decision. No earlier decision in the same proceedings is stated in the judgment.
Key cases cited
14 authorities cited.
- Guest and another v Guest [2022] UKSC 27
- Pakistan International Airline Corporation v Times Travel (UK) Ltd [2021] UKSC 40
- Jacinth Kelly, Millicent Campbell, Claudia Davis, Courtney Miller and Ernel Lewis v Michael Fraser (Jamaica) [2012] UKPC 25
- Bank of Scotland v Bennett [2002] 2 AC 773
- Gallie v Lee (Saunders v Anglia Building Society) [1971] AC 1004
- The Counsel General for Wales, R (on the application of) v The Secretary of State for Business, Energy and Industrial Strategy (No 2) [2022] EWCA Civ 181
- BV Nederlandse Industrie Van Eiprodukten v Rembrandt Enterprises, Inc. [2019] EWCA Civ 596
- Maggs (t/a BM Builders) v Marsh & Anor [2006] EWCA Civ 1058
- GOOSE v WILSON SANDFORD & CO (A FIRM) [2001] Lloyd's Rep PN 189
- SK Shipping Europe Plc v Capital Vlcc 3 Corp & Anor [2020] EWHC 3448 (Comm)
- Vald. Nielsen Holding A/S Newwatch Ltd v Baldorino & Ors [2019] EWHC 1926 (Comm)
- IFE Fund SA v Goldman Sachs International [2006] EWHC 2887 (Comm)
- Snook v London and West Riding Investments Ltd [1967] 2 QB 786
- Derry v Peek (1889) 14 App Cas 337
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Cases citing this case
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