Undue Influence Remedies
Cases
Allcard v. Skinner
(1887) 36 Ch. D 145
Cotton LJ: … The question is-Does the case fall within the principles laid down by the deci sions of the Court of Chancery in setting aside voluntary gifts executed by parties who at the time were under such influence as, in the opinion of the Court, enabled the donor afterwards to set the gift aside? These decisions may be divided into two classes-First, where the Court has been satisfied that the gift was the result of influence expressly used by the donee for the purpose; second, where the relations between the donor and donee have at or shortly before the execution of the gift been such as to raise a presumption that the donee had influence over the donor. In such a case the Court sets aside the voluntary gift, unless it is proved that in fact the gift was the spontaneous act of the donor acting under circumstances which enabled him to exercise an independent will and which justifies the Court in holding that the gift was the result ofa free exercise of the donor’s will. The first class of cases may be considered as depending on the principle that no one shall be allowed to retain any benefit arising from his own fraud or wrongful act. In the second class of cases the Court interferes, not on the ground that any wrongful act has in fact been committed by the donee, but on the ground of public policy, and
to prevent the relations which existed between the parties and the influence arising therefrom being abused.
Both the Defendant and Mr Nihill have stated that they used no influence to induce the Plaintiff to make the gift in question, and there is no suggestion that the Defendant acted from any selfishmotive, and it cannot be contended that this case comes under the first class of deci sions to whichI have referred. The question is whether the case comes within the principle of the second class, andI am of opinion that it does. At the time of the gift the Plaintiff wasa pro fessed sister, and, as such, bound to render absolute submission to the Defendant as superior of mental imbecility as to justify the inference that she was unable to take care of herself or to manage her own affairs.
The rule against obtaining advice from externs without the consent of the lady superior invites great suspicion. It is evidently a rule capable of being used in a very tyrannical way, and so as to result in intolerable oppression. I have carefully examined the evidence to see how this rule practically worked, but I can find nothing on the subject. I can find nothing to shew one way or the other what would have been the effect, for example, of a request for leave to consult a friend, or to obtain legal or other advice respecting any disposition of property, or respecting leaving the sisterhood. There, however, is the rule, and a very important one it is. I shall have occasion to refer to it again hereafter. Such being the nature of the vows and rules which the Plaintiff had taken, and to which she had submitted herself, and by which she felt herself bound by the highest religious sanctions, it is necessary to examine what she did with her property, and the circumstances under which she gave it to the sisterhood.
….. She had no power to obtain independent advice, she was in sucha position. The evidence shews that her brother, who was one of her trustees, kept her fully informed that she could not freely exercise her own will as to the disposal of her property, and she must be considered as being, to use the words of Lord Justice Knight Bruce in Wnght v. Vanderplank, ‘not, in the largest and amplest sense of the term-not, in mind as well as per
son-an entirely free agent.’ We have•nothing to do with the Plaintiff’s reasons for leaving the sisterhood; but, in my opinion, when he exercised her legal right to do this she was entitled to recover so much of the fund transferrtd by her as remained in the hands of the Defendant, on the ground that it was property the beneficial interest in which she had never effectually parted with. But it was urged that it would be contrary to public policy to grant the Plaintiff relief, on the ground that it would be a hindrance to the charitable work in which the Plaintiff and the sisterhood were engaged, and that it would be better to shew those who were desirous of leav ing the work that they could not take with them any part of their property. But in my opinion it would be wrong to put such pressure on those who may wish to leave. Such work to be effec tual must be done with a willing mind, and in my opinion it would be productive of evil to attempt to retain in such a society as the sisterhood, by the pressure of loss of property, those whose hearts and will are no longer in the work, and who desire to exercise their legal right of withdrawing.
But it is contended, and Mr Justice Kekewick decided against the Plaintiff on this ground, that she had competent advice, that of her brother, before she joined the sisterhood, and that she then formed the resolution (as Mr Nihi/1 stated in his evidence) to give everything to the sisterhood, and that this prevents the subsequent transfer being set aside. In my opinion, even if there were evidence that she had, before she joined the sisterhood, advice on the question of how she should deal with her property, that would not be sufficient. The question is,I think, whether at the time when she executed the transfer she was under such influences as to prevent the gift being considered as that of one free to determine what should be done with her prop erty. No reliance can be placed on the promise made to Mr Niki/I. This could not be enforced,
and did not in any way bind her in law, or pass the property; and the title of the Defendant depends solely on the transfer made in 1874. In my opinion, when the Plaintiff left the sister
hood in 1879, she was entitled to set aside the transfer, and to have re-transferred to her the fund still held by the Defendant… .
Lindley LJ: … It is important … to bear in mind that the fetter … placed on the Plaintiff was the result of her own free choice. There is no evidence that pressure was put upon her to enter upon the mode oflife which she adopted. She chose it as the best for herself; she devoted herself to it, heart and soul; she was, to use her own expression, infatuated with the life and with thework. But though infatuated, there is no evidence to shew that she was in sucha state of what her property consisted of, and he remitted to her from time to time cheques and trans fers of railway stock and other securities to which she was entitled. The brother’s letters and the cheques and transfers all passed through the hands of the lady superior, it being the rule that she should see all letters to sisters. The Plaintiff gave all the cheques to the lady superior, after indorsing them, and also transferred to her all the railway stock and securities as they were received. The cheques were handed over to Mr Nihi/1, who was the treasurer of the sisterhood, and were paid by him into a bank to an account kept in his own name, and on which he alone could draw. The sisterhood was building an hospital in which the Plaintiff took great interest, and most of the Plaintiff’s money was spent in defraying the expenses of the building. I have examined the evidence with care in order to see whether any pressure was put upon the Plaintiff in order to induce her to give her property to the sisterhood, or whether any deception was practised upon her, or whether any unfair advantage was taken of her, or whether any of her money was applied otherwise than bona.fide for the objects of the sisterhood, or for any purpose which the Plaintiff could disapprove. The result of the evidence convinces me that no pressure, except the inevitable pressure of the vows and rules, was brought to bear on the Plaintiff; that no deception was practised upon her; that no unfair advantage was taken of her; that none of her money was obtained or applied for any purpose other than the legitimate objects of the sis terhood. Not a farthing of it was either obtained or applied for the private advantage of the lady superior or Mr Niki/I; nor indeed did the Plaintiff ever suggest that such had been the case. The real truth is that the Plaintiff gave away her property as a matter of course, and without seri ously thinking of the consequences to herself. She had devoted herself and her fortune to the sisterhood, and it never occurred to her that she should ever wish to leave the sisterhood or desire to have her money back. In giving away her property as she did she was merely acting up to her promise and vow and the rule of the sisterhood, and to the standard of duty which she had erected for herself under the influences and circumstances already stated.
By her action the Plaintiff sought to recover the whole of the money back which she had given to the sisterhood, amounting to nearly £8500. Mr Justice Kekewich tried the action, and gave judgment for the Defendant. From this judgment the Plaintiff has appealed, but she has limited her appeal to two sums of £500 and £1171, railway stock transferred by her to the lady superior, and still standing in her name.
Two questions are raised by the appeal, namely, 1st, Whether the gifts made by the Plain tiff to the sisterhood were revocable or irrevocable when made? 2nd, Whether, assuming them to have been revocable when made, it was competent for the Plaintiff to revoke them when she did?
The first question is one of great importance and difficulty. Its solution requires a careful consideration of the legal effect of gifts by persons of mature age who feel bound by vows and rules to give away their property, but who have taken the vows and submitted to the rules voluntarily and without pressure, and who are subject to no other coercion or influence than necessarily result from the vows and rules themselves, and from the state of their own mind.
There is no statutory law in this country prohibiting such gifts unless what is given is land or money to be laid out in land. These are provided for by the Mortmain and Charitable Uses Acts. But they have no application to this case. The common law, as distinguished from equity, does not invalidate such gifts as these. There being no duress or fraud, the only ground for impeaching such gifts at law would be want of capacity on the part of the donor; and although the Plaintiff was a religious enthusiast, no one could treat her as in point of law non compos men tis. There is no authority whatever for saying that her gifts were invalid at law. It is to the doc trines of equity, then, that recourse must be had to invalidate such gifts, if they are to be invalidated. The doctrine relied upon by the Appellant is the doctrine of undue influence expounded and enforced in Huguenin v. Baseley2 and other cases of that class. These cases may be subdivided into two groups, which, however, often overlap.
First, there are the cases in which there has been some unfair and improper conduct, some coercion from outside, some overreaching, some form of cheating, and generally, though not always, some personal advantage obtained by a donee placed in some close and confidential rela tion to the donor Theevidence does not bring this case within this group.
The second group consists of cases in which the position of the donor to the donee has been such that it has been the duty of the dqnee to advise the donor, or even to manage his property for him. In such cases the Court throws upon the donee the burden of proving that he has not abused his position, and of proving that the gift made to him has not been brought about by any undue influence on his part. In this class of cases it has been considered necessary to shew that the donor had independent advice”, and was removed from the influence of the donee when the gift to him was made. Huguenin v. Baseley was a case of this kind. The defendant had not only acquired considerable spiritual influence over the plaintiff, but was intrusted by her with the management of her property. His•duty to her was clear, and it was with reference to per sons so situated that Lord Eldon used the language so often quoted and so much relied on in this case. He said: ‘Take it that she (the plaintiff) intended to give it to him (the defendant): it is by no means out of the reach of the principle. The question is, not, whether she knew, what she was doing, had done, or proposed to do, but how the intention was produced: whether all that care and providence was placed round her, as against those, who advised her, which, from their situation and relation with respect to her, they were bound to exert on her behalf.’ This principle has been constantly recognised and acted upon in subsequent cases, but in all of them, as in Huguenin v. Baseley itself, it was the duty of the donee to advise and take care of the donor. Where there is no such duty the language of Lord Eldon ceases to be applicable.
I have not been able to find any case in which a gift has been set aside on the ground of undue influence which does not fall within one or other or both of the groups above mentioned. Nor can I find any authority which actually covers the present case. But it does not follow that it is not reached by the principle on which the Court has proceeded in dealing with the cases which have already called for decision. They illustrate but do not limit the principle applied to them. The principle must be examined. What then is the principle? Is it that it is right and expe dient to save persons from the consequences of their own folly? or is it that it is right and expe dient to save them from being victimised by other people? In my opinion the doctrine of undue influence is founded upon the second of these two principles. Courts of Equity have never set aside gifts on the ground of the folly, imprudence, or want of foresight on the part of donors. The Courts have always repudiated any such jurisdiction. Huguenin v. Baseley is itself a clear authority to this effect. It would obviously be to encourage folly, recklessness, extravagance and vice if persons could get back property which they foolishly made away with, whether by giv ing it to charitable institutions or by bestowing it on less worthy objects. On the other hand, to protect people from being forced, tricked or misled in any way by others into parting with their property is one of the most legitimate objects of all laws; and the equitable doctrine of undue influence has grown out of and been developed by the necessity of grappling with insidious forms of spiritual tyranny and with the infinite varieties of fraud.
As no Court has ever attempted to define fraud so no Court has ever attempted to define
undue influence, which includes one of its many varieties. The undue influence which Courts of Equity endeavour to defeat is the undue influence of one person over another; not the influ ence of enthusiasm on the enthusiast who is carried away by it, unless indeed such enthusiasm is itself the result of external undue influence. But the influence of one mind over another is very subtle, and of all influences religious influence is the most dangerous and the most power ful, and to counteract it Courts of Equity have gone very far. They have not shrunk from set ting aside gifts made to persons in a position to exercise undue influence over the donors, although there has been no proof of the actual exercise of such influence; and the Courts have done this on the avowed ground of the necessity of going this length in order to protect per sons from the exercise of such influence under circumstances which render proof of it impos sible. TheCourts have required proof of its non-exercise, and, failing that proof, have set aside gifts otherwise unimpeachable. In this particular case I cannot find any proof that any gift made by the Plaintiff was the result of any actual exercise of power or influence on the part of the lady
superior or of Mr Nihi/1, apart from the influence necessarily incidental to their position in the
sisterhood. Everything that the Plaintiff did is in my opinion referable to her own willing sub mission to the vows she took and to the rules which she approved, and to her own enthusiastic devotion to the life and work of the sisterhood. This enthusiasm and devotion were nourished, strengthened and intensified by the religious services of the sisterhood and by the example and influence of those about her. But she chose the life and work; such fetters as bound her were voluntarily put upon her by herself; she could shake them off at any time had she thought fit, and had she had the courage so to do; and no unfair advantage whatever was taken ofher. Under these circumstances it is going a long way to hold that she can invoke the doctrine of undue influence to save her from the consequences of her own acts, and to entitle her to avoid the gifts she made when in a state of mind different from that in which she now is. I am by no means insensible of the difficulty of going so far.
Nevertheless, consider the position in which the Plaintiff had placed herself. She had vowed poverty and obedience, and she was not at liberty to consult externs without the leave of her
superior. She was not a person who treated her vows lightly; she was deeply religious and felt bound by her promise, by her vows, and by the rules of the sisterhood. She was absolutely in the power of the lady superior and Mr Nihi/1. A gift made by her under these circumstances to the lady superior cannot in my opinion be retained by the donee. The equitable title of the donee is imperfect by reason of the influence inevitably resulting from her position, and which influence experience has taught the Courts to regard as undue. Whatever doubtI might have had on this point if there had been no rule against consulting externs, that rule in my judgment turns the scale against the Defendant. In the face of that rule the gifts made to the sisterhood cannot be supported in the absence of proof that the Plaintiff could have obtained independent advice if she wished for it, and that she knew that she would have been allowed to obtain such advice if she had desired to do so. I doubt whether the gifts could have been supported if such proof had been given, unless there was also proof that she was free to act on the advice which might be given to her. But the rule itself is so oppressive and so easily abused that any person subject to it is in my opinion brought within the class of those whom it is the duty of the Court to protect from possible imposition. The gifts cannot be supported without proof of more free dom in fact than the Plaintiff can be supposed to have actually enjoyed.
The case is brought within the principle so forcibly expressed by the late Lord Justice Knight Bruce in Wright v. Vanderplanle, in which a gift by a daughter to her father was sought to be set aside. If any independent person had explained to the Plaintiff that her promise to give all her property to the sisterhood was not legally binding upon her, and that her vows of poverty and obedience had no legal validity, and that if she gave her property away and afterwards left the sisterhood she would be unable to get her property back, it is impossible to say what she might or might not have done. In fact she never had the opportunity of considering this question.
Where a gift is made to a person standing in a confidential relation to the donor, the Court will not set aside the gift if of a small amount simply on the ground that the donor had no independent advice. In such a case, some proof of the exercise of the influence of the donee must be given. The mere existence of such influence is not enough in such a case; see the obser vations of Lord Justice Turner in Rhodes v. Bate.3 But if the gift is so large as not to be reason ably accounted for on the gr9.und of friendship, relationship, charity, or other ordinary motives on which ordinary men act, the burden is upon the donee to support the gift. So, in a case like this, a distinction might well be made between gifts of capital and gifts of income, and between gifts of moderate amount and gifts of large sums, which a person unfettered by vows and oppressive rules would not be likely to wish to make. In this case the Plaintiff gave away prac tically all she could, although, having a life interest in other property, she did not reduce her self to a state of poverty.
As I have already stated, I believe that in this case there was in fact no unfair or undue influ ence brought to bear upon the Plaintiff other than such as inevitably resulted from the training she had received, the promise she had made, tl\e vows she had taken, and the rules to which she had submitted herself. But her gifts were in flct made under a pressure which, whilst it lasted, the Plaintiff could not resist, and were not, in my opinion, past recall when that pressure was removed. When the Plaintiff emancipated herself from the spell by which she was bound, she was entitled to invoke the aid of the Court in order to obtain the restitution from the Defendant of so much of the Plaintiff’s property as had not been spent in accordance with the wishes of the Plaintiff, but remained in the hands of the Defendant. The Plaintiff now demands no more.
Bowen, LJ: … Itseems to me that it is of essential importance to keep quite distinct two things which in their nature seem to me to be different-the rights of the donor, and the duties of the donee and the obligations which are imposed upon the conscience of the donee by the princi ples of this Court. As to the rights of the donor in a case like the present I entertain no doubt. It seems to me that persons who are under the most complete influence of religious feeling are perfectly free to act upon it in the disposition of their property, and not the less free because they are enthusiasts. Persons of this kind are not dead in law. They are dead indeed to the world so far as their own wishes and feelings about the things of the world are concerned; but such indifference to things external does not prevent them in law from being free agents. In the pres ent instance there was no duress, no incompetency, no want of mental power on the part of the donor. It seems to me that, so far as regards her rights, she had the absolute right to deal with her property as she chose. Passing next to the duties of the donee, it seems to me that, although this power of perfect disposition remains in the donor under circumstances like the present, it is plain that equity will not allow a person who exercises or enjoys a dominant religious influ ence over another to benefit directly or indirectly by the gifts which the donor makes under or in consequence of such influence, unless it is shewn that the donor, at the time of making the gift, was allowed full and free opportunity for counsel and advice outside-the means of con sidering his or her worldly position and exercising an independent will about it. This is not a limitation placed on the action of the donor; it is a fetter placed upon the conscience of the recipient of the gift, and one which arises out of public policy and fair play. If this had been the gift of a chattel, therefore, the property then would have passed in law, and the gift of this stock may be treated upon a similar method of reasoning. Now, that being the rule, in the first place, was the Plaintiff entitled to the benefit of it? She had vowed in the most sacred and solemn way absolute and implicit obedience to the will of the Defendant, her superior, and she was bound altogether to neglect the advice of externs-not to consult those outside the convent. Now I offer no sort of criticism on institutions of this sort; no kind of criticism upon the action ofthoN who enter them or of those who administer them. In the abstract I respect their motivea, but it is obvious that it is exactly to this class of case that the rule of equity which I have mentioned ought to be applied if it exists. It seems to me that the Plaintiff, so long as she was fettered by this vow-so long as she was under the dominant influence of this religious feeling-was a per son entitled to the protection of the rule. Now, was the Defendant bound by this rule? I acquit her most entirely of all selfish feeling in the matter. I can see no sort of wrongful desire to appro priate to herself any worldly benefit from the gift; but, nevertheless, she was a person who bene fited by it so far as the disposition of the property was concerned, although, no doubt, she meant to use it in conformity with the rules of the institution, and did so use it. I pause for one moment to say a word as to Mr Justice Kekewich’s view, which is not altogether consistent with the above. He seems to have thought that the question turned on the original intention of the donor
at the time she entered the convent, and that what passed subsequently could be treated as if it were a mere mechanical performance of a complete mental intention originally formed. I entirely agree with the view presented to us by the Appellant as to that part of Mr Justice Kekewich’s judgment. It seems to me that the case does not turn upon the fact that the stand ard of duty was originally created by the Plaintiff herself, although her original intention is one of the circumstances, no doubt, which bear upon the case, and is not to be neglected. But it is not the crucial fact. We ought to look, it seems to me, at the time at which the gift was made, and to examine what was then the condition of the donor who made it. For these reasons I think that without any interference with the freedom of persons to deal with their property as they please, we can hold but one opinion, that in 1879 the Plaintiff could have set this gift aside.
.
National Westminster Bank plc v. Morgan
[1985] AC 686
Lord Scarman: … As to the facts, I am far from being persuaded that the trial judge fell into error when he concluded that the relationship between the bank and Mrs Morgan never went beyond the normal business relationship of banker and customer. Both Lords Justices saw the relationship between the bank and Mrs Morgan as one of confidence in which she was relying on the bank manager’s advice. Each recpgnised the personal honesty, integrity, and good faith of Mr Barrow. Each took the view that the confidentiality of the relationship was such as to impose upon him a ‘fiduciary duty of care.’ It was his duty, in their view, to ensure that Mrs Morgan had the opportunity to make an independent and informed decision: but he failed to give her any such opportunity. They, therefore, concluded that it was a case for the presump tion of undue influence.
My Lords, I believe that the Lords Justices were led into a misinterpretation of the facts by their use, as is all too frequent in this branch of the law, of words and phrases such as ‘confi dence,’ ‘confidentiality,’ ‘fiduciary duty.’ There are plenty of confidential relationships which do not give rise to the presumption of undue influence (a notable example is that of husband and wife, Bank of Montreal v. Stuart [191I] AC 120); and there are plenty of non-confidential relationships in which one person relies upon the advice of another, e.g. many contracts for the sale of goods. Nor am I persuaded that the charge, limited as it was by Mr Barrow’s declara tion to securing the loan to pay off the Abbey National debt and interest during the bridging period, was disadvantageous to Mrs Morgan. It meant for her the rescue of her home upon the terms sought by her-a short-term loan at a commercial rate of interest. The Court of Appeal has not, therefore, persuaded me that the judge’s understanding of the facts was incorrect.
But, further, the view of the law expressed by the Court of Appeal was, as I shall endeavour to show, mistaken. Dunn LJ, at 90, while accepting that in all the reported cases to which the court was referred the transactions were disadvantageous to the person influenced, took the view that in cases where public policy requires the court to apply the presumption of undue influence there is no need to prove a disadvantageous transaction. Slade LJ also clearly held that it was not necessary to prove a disadvantageous transaction where the relationship of influence was proved to exist. Basing himself on the judgment of Cotton LJ in A/Icard v. Skinner (1887) 36 Ch.D 145, 171, he said, at 92:
‘Where a transaction has been entered into between two parties who stand in the relevant relationship to one another, it is still possible that the relationship and influence arising therefrom has been abused, even though the transaction is, on the face of it, one which, in commercial terms, provides reasonably equal benefits for both parties.’ I can find no support for this view of the law other than the passage in Cotton LJ’s judgment in AlIcard v. Skinner to which Slade LJ referred. The passage is as follows, at 171:
‘The question is-Does the case fall within the principles laid down by the decisions of the Court of Chancery in setting aside voluntary gifts executed by parties who at the time were under such influence as, in the opinion of the court, enabled the donor afterwards to set the gift aside? These decisions may be divided into two classes-First, where the court has been satisfied that the gift was the result of influence expressly used by the donee for the purpose; second, where the relations between the donor and donee have at or shortly before the execution of the gift been such as to raise a presumption that the donee had influence over the donor. In such a case the court sets aside the voluntary gift, unless it is proved that in fact the gift was the spontaneous act of the donor acting under circum stances which enabled him to exercise an independent will and which justifies the court in holding that the gift was the result of a free exercise of the donor’s will. The first class of cases may be considered as depending on the principle that no one shall be allowed to retain any benefit arising from his own fraud or wrongful act. In the second class of cases the court interferes, not on the ground that any wrongful act has in fact been committed by the donee, but on the ground of public policy, and to prevent the relations which existed between the parties and the influence arising therefrom being abused.’
The transactions in question in A/Icard v. Skinner were gifts: it is not to be supposed that Cotton LJ was excluding the applicability of his observations to other transactions in which disadvan tage or sacrifice is accepted by the party influenced. It is significant for the proper understand ing of his judgment that gifts are transactions in which the donor by parting with his property accepts a disadvantage or a sacrifice, and that in AlIcard v. Skinner the donor parted with almost all her property. I do not, therefore, understand the Lord Justice, when he accepted that Miss Allcard’s case fell into the class where undue influence was to be presumed, to have treated as irrelevant the fact that her transaction was manifestly disadvantageous to her merely because he was concerned in the passage quoted to stress the importance of the relationship. If, however, as Slade LJ clearly thought, Cotton LJ in the last sentence quoted should be understood as lay ing down that the transaction need not be one of disadvantage and that the presumption of undue influence can arise in respect of a transaction which provides ‘reasonably equal benefits for both parties,’ I have with great respect to say that in my opinion the Lord Justice would have erred in law: principle and authority are against any such proposition.
Like Dunn LJ, I know of no reported authority where the transaction set aside was not to the manifest disadvantage of the person influenced. It would not always be a gift: it can be a ‘hard and inequitable’ agreement (Ormes v. Beadel (1860) 2 Gif. 166, 174); or a transaction ‘immod erate and irrational’ (Bank of Montreal v. Stuart [1911] AC 120, 137) or ‘unconscionable’ in that it was a sale at an undervalue (Poosathurai v. Kannappa Chettiar (1919) LR 47 IA 1, 3-4). Whatever the legal character of the transaction, the authorities show that it must constitute a disadvantage sufficiently serious to require evidence to rebut the presumption that in the cir cumstances of the relationship between the parties it was procured by the exercise of undue influence. In my judgment, therefore, the Court of Appeal erred in law in holding that the pre sumption of undue influence can arise from the evidence of the relationship of the parties with out also evidence that the transaction itself was wrongful in that it constituted an advantap taken of the person subjected to the influence which, failing proof to the contrary, wu explio able only on the basis that undue influence had been exercised to procure it.
The principle justifying the court in setting aside a transaction for undue influence now be seen to have been established by Lindley LJ in A/Icard v. Skinner, 36 Ch.D 145. by Lindley LJ in a famous passage [he then set out a long passage from the judgment, which is extracted above, at 374-8, and continued
Subsequent authority supports the view of the law as expressed by Lindley LJ in A/Icard v. Skinner. The need to show that the transaction is wrongful in the sense explained by Lindley LJ before the court will set aside a transaction whether relying on evidence or the presumption of the exercise of undue influence has been asserted in two Privy Council cases. In Bank of Montreal v. Stuart [1911] AC 120, 137 Lord Macnaghten, delivering the judgment of the Board, said:
‘It may well be argued that when there is evidence of overpowering influence and the transaction brought about is immoderate and irrational, as it was in the present case, proof of undue influence is complete. However that may be, it seems to their Lordships that in this case there is enough, according to the recognized doctrine of courts of equity, to enti tle Mrs Stuart to relief. Unfair advantage of Mrs Stuart’s confidence in her husband was taken by Mr Stuart, and also it must be added by Mr Bruce.’
In Poosathurai v. Kannappa Chettiar, LR 47 IA l, 3 Lord Shaw of Dunfermline, after indi cating that there was no difference upon the subject of undue influence between the Indian Contract Act 1872 and English law quoted the Indian statutory provision, section 16(3): ‘Where a person who is in a position tQ dominate the will of another enters into a contract with him, and the transaction appears’on the face of it, or on the evidence, to be uncon scionable, the burden of proving that such contract was not induced by undue influence shall lie upon the person in the position to dominate the will of the other.’
He then proceeded, at 4, to state the principle in a passage of critical importance, which, since, so far as I am aware, the case is reported only in the Indian Reports, I think it helpful to quote in full:
‘It must be established that the person in a position of domination has used that position to obtain unfair advantage for himself, and so to cause injury to the person relying upon his authority or aid. Where the relation of influence, as above set forth, has been estab lished, and the second thing is also made clear, namely, that the bargain is with the “influ encer,” and in itself unconscionable, then the person in a position to use his dominating power has the burden thrown upon him, and i is a heavy burden, of establishing affirma tively that no domination was practised so as to bring about the transaction, but that the grantor of the deed was scrupulously kept separately advised in the independence of a free agent. These general propositions are mentioned because, if laid alongside of the facts of the present case, then it appears that one vital element-perhaps not sufficiently relied on in the court below, and yet essential to the plaintiff’s case–is wanting. It is not proved as a fact in the present case that the bargain of sale come to was unconscionable in itself or constituted an advantage unfair to the plaintiff; it is, in short, not established as a matter of fact that the sale was for undervalue.’
The wrongfulness of the transaction must, therefore, be shown: it must be one in which an unfair advantage has been taken of another. The doctrine is not limited to transactions of gift. A commercial relationship can become a relationship in which one party assumes a role of dom inating influence over the other. In Poosathurai’s case, LR 47 IA I the Board recognised that a sale at an undervalue could be a transaction which a court could set aside as unconscionable if it was shown or could be presumed to have been procured by the exercise of undue influence. Similarly a relationship of banker and customer may become one in which the banker acquires a dominating influence. Ifhe does and a manifestly disadvantageous transaction is proved, there would then be room for the court to presume that it resulted from the exercise of undue influ ence.
This brings me to Lloyds Bank Ltd v. Bundy [1975] QB 326. It was, as one would expect, conceded by counsel for the respondent that the relationship between banker and customer is not one which ordinarily gives rise to a presumption of undue influence: and that in the ordin ary course of banking business a banker can explain the nature of the proposed transaetion with out laying himself open to a charge of undue influence. This proposition has never been In doubt, though some, it would appear, have thought that the Court of Appeal held otherwise in Lloyds Bank Ltd v. Bundy. If any such view has gained currency, let it be destroyed now once and for all time: see Lord Denning MR, at 336F, Cairns LJ, at 3400, and Sir Eric Sachs, at 34ltt-342A. Your Lordships are, of course, not concerned with the interpretation put upon the facts in that case by the Court of Appeal: the present case is not a rehearing of that case. The question which the House does have to answer is: did the court in Lloyds Bank Ltd v. Bundy
accurately state the law?
Lord Denning MR believed that the doctrine of undue influence could be subsumed under a general principle that English courts will grant relief where there has been ‘inequality of bar gaining power’ (339). He deliberately avoided reference to the will of one party being domi nated or overcome by another. The majority of the court did not follow him; they based their decision on the orthodox view of the doctrine as expounded in A/Icard v. Skinner, 36 Ch.D 145. The opinion of the Master of the Rolls, therefore, was not the ground of the court’s decision, which was to be found in the view of the majority, for whom Sir Erich Sachs delivered the lead ing judgment.
Nor has counsel for the respondent sought to rely on Lord Denning MR’s general principle; and, in my view, he was right not to do so. The doctrine of undue influence has been sufficiently developed not to need the support of a principle which by its formulation in the language of the law of contract is not appropriate to cover transactions of gift where there is no bargain. The fact of an unequal bargain will, of course, be a relevant feature in some cases of undue influ ence. But it can never become an appropriate basis of principle of an equitable doctrine which is concerned with transactions ‘not to be reasonably accounted for on the ground of friendship, relationship, charity, or other ordinary motives on which ordinary men act’ (Lindley LJ in A/Icard v. Skinner, at 185). And even in the field of contract I question whether there is any need in the modem law to erect a general principle of relief against inequality of bargaining power. Parliament has undertaken the task–and it is essentially a legislative task–of enacting such restrictions upon freedom of contract as are in its judgment necessary to relieve against the mischief: for example, the hire-purchase and consumer protection legislation, of which the Supply of Goods (Implied Terms) Act 1973, Consumer Credit Act 1974, Consumer Safety Act 1978, Supply of Goods and Services Act 1982 and Insurance Companies Act 1982 are exam ples. I doubt whether the courts should assume the burden of formulating further restrictions. I turn, therefore, to consider the ‘ratio decidendi’ of Sir Eric Sachs’s judgment. In so far as Sir Eric appears to have accepted the ‘public policy’ principle formulated by Cotton LJ in Allcard v. Skinner, I think for the reasoqs which I have already developed that he fell into error if he is to be understood as also saying that it matters not whether the transaction itself was wrongful in the sense explained by Lindley LJ in Allcard v. Skinner, by Lord Macnaghten in Bank of Montreal v. Stuart (1911] AC 120, 137 and by Lord Shaw of Dunfermline in the Poosathurai case, LR 47 IA 1, 4. But in the last paragraph of his judgment where Sir Eric turned to consider the nature of the relationship necessary to give rise to the presumption of undue
influence in the context of a banking transaction, he got it absolutely right. ….
A meticulous examination of the facts of the present case reveals that Mr Barrow never ‘crossed the line.’ Nor was the tran6action unfair to Mrs Morgan. The bank was, therefore, under no duty to ensure that she hall independent advice. It was an ordinary banking transac tion whereby Mrs Morgan sought to save her home; and she obtained an honest and truthful explanation of the bank’s intention·which, notwithstanding the terms of the mongage deed which in the circumstances the trial judge was right to dismiss as ‘essentially theoretical,’ was correct: for no one has suggested that Mr Barrow or the bank sought to make Mrs Morgan liable, or to make her home the security, for any debt of her husband other than the loan and interest necessary to save the hou!\e from being taken away from them in discharge of their indebtedness to the building society.
For these reasons, I would allow the appeal. In doing so, I would wish to give a warning. There is no precisely defined law setting limits to the equitable jurisdiction of a coun to relieve against undue influence. This is the world of doctrine, not of neat and tidy rules. The couns of equity have developed a body of learning enabling relief to be granted where the law has to treat the transaction as unimpeachable unless it can be held to have been procured by undue influ ence. It is the unimpeachability at law of a disadvantageous transaction which is the starting point from which the court advances to consider whether the transaction is the product merely of one’s own folly or of the undue influence exercised by another. A court in the exercise of this equitable jurisdiction is a court of conscience. Definition is a poor instrument when used to determine whether a transaction is or is not unconscionable: this is question which depends upon the particular facts of the case.
Barclays Bank plc v. O’Brien
[1994] 1 AC 180
Lord Browne-Wilkinson: …
Policy considerations
The large number of cases of this type coming before the courts in recent years reflects the rapid changes in social attitudes and the distribution of wealth which have recently occurred. Wealth is now more widely spread. Moreover a high proportion of privately owned wealth is invested in the matrimonial home. Because of the recognition by society of the equality of the sexes, the majority of matrimonial homes are now in the joint names of both spouses. Therefore in order to raise finance for the business enterprises of one or other of the spouses, the jointly owned home has become a main source of security. The provision of such security requires the consent of both spouses.
In parallel with these financial developments, society’s recognition of the equality of the sexes
has led to a rejection of the concept that the wife is subservient to the husband in the manage ment of the family’s finances. A number pf the authorities reflect an unwillingness in the court to perpetuate law based on this outmodt:d concept. Yet, as Scott LJ in the Court of Appeal rightly points out [1993] QB 109, 139, although the concept of the ignorant wife leaving all financial decisions to the husband is outmoded, the practice does not yet coincide with the ideal. In a substantial proportion of marriages-it is still the husband who has the business experience and the wife is willing to follow his advice without bringing a truly independent mind and will to bear on financial decisions. The number of recent cases in this field shows that in practice many wives are still subjected to, and yield to, undue influence by their husbands. Such wives can reasonably look to the law for some protection when their husbands have abused the trust and confidence reposed in them.
On the other hand, it is important to keep a sense of balance in approaching these cases. It is
easy to allow sympathy for the wife who is threatened with the loss of her home at the suit of a rich bank to obscure an important public interest viz., the need to ensure that the wealth cur rently tied up in the matrimonial home does not become economically sterile. If the rights secured to wives by the law renders vulnerable loans granted on the security of matrimonial homes, institutions will be unwilling to accept such security, thereby reducing the flow ofloan capital to business enterprises. It is therefore essential that a law designed to protect the vul nerable does not render the matrimonial home unacceptable as security to financial institutions. With these policy considerations in mind I turn to consider the existing state of the law. The whole of modern law is derived from the decision of the Privy Council in Turnbull (5 Co. v. Duval (1902] AC 429 which, as I will seek to demonstrate, provides an uncertain foundation. Before considering that case however, I must consider the law of undue influence which (though not directly applicable in the present case) underlies both Duval’s case and most of the later authorities.
Undue influence ·
A person who has been induced to enter into a transaction by the undue influence of another (‘the wrongdoer’) is entitled to set that transaction aside as against the wrongdoer. Such undue influence is either actual or presumed. In Bank of Credit and Commerce International SA v. Aboody [1990] 1Q!3923, 953, the Court of Appeal helpfully adopted the following classification.
Class 1: Actual undue influence
In these cases it is necessary for the claimant to prove affirmatively that the wrongdoer exerted undue influence on the complainant to enter into the particular transaction which is impugned.
Class 2: Presumed undue influence
In these cases the complainant only has to show, in the first instance, that there wu • rela tionship of trust and confidence between the complainant and the wrongdoer of such • nature that it is fair to presume that the wrongdoer abused that relationship in procuring the com plainant to enter into the impugned transaction. In Class 2 cases therefore there is no need to produce evidence that actual undue influence was exerted in relation to the particular tranac tion impugned: once a confidential relationship has been proved, the burden then shifts to the wrongdoer to prove that the complainant entered into the impugned transaction freely, for example by showing that the complainant had independent advice. Such a confidential rela tionship can be established in two ways, viz.,
Class 2(A)
Certain relationships (for example solicitor and client, medical advisor and patient) as a matter of law raise the presumption that undue influence has been exercised.
Class 2(B)
Even if there is no relationship falling within Class 2(A), if the complainant proves the de facto existence of a relationship under which the complainant generally reposed trust and con fidence in the wrongdoer, the existence of such relationship raises the presumption of undue influence. In a Class 2(8) case therefore, in the absence of evidence disproving undue influence, the complainant will succeed in setting aside the impugned transaction merely by proof that the complainant reposed trust and confidence in the wrongdoer without having to prove that the wrongdoer exerted actual undue influence or otherwise abused such trust and confidence in relation to the particular transaction impugned.
As to dispositions by a wife in favour of her husband, the law for long remained in an unset tled state. In the 19th century some judges took the view that the relationship was such that it fell into Class 2(A) i.e. as a matter oflaw undue influence by the husband over the wife was pre sumed. It was not until the decisions in Howes v. Bishop (1909] 2 KB 390 and Bank of Montreal
v. Stuart (1911] AC 120 that it was finally determined that the relationship of husband and wife did not as a matter of law raise a presumption of undue influence within Class 2(A). It is to be noted therefore that when the Duval case was decided in 1902 the question whether there was a Class 2(A) presumption of undue influence as between husband and wife was still unresolved.
An invalidating tendency?
Although there is no Class 2(A) presumption of undue influence as between husband and wife, it should be emphasised that in any particular case a wife may well be able to demonstrate that de facto she did leave decisions on financial affairs to her husband thereby bringing herself within Class 2(8) i.e. that the relationship between husband and wife in the particular case was such that the wife reposed confidence and trust in her husband in relation to their financial affairs and therefore undue influence is to be presumed. Thus, in those cases which still occur where the wife relies in all financia1 matters on her husband and simply does what he suggests, a presumption of undue influence within Class 2(8) can be established solely from the proof of such trust and confidence without proof of actual undue influence.
In the appeal in C.J.B.C. Mortgages Pie. v. Pitt (judgment in which is to be given immedi ately after that in the present appeal), post, 200, Mr Price for the wife argued that in the case of transactions between husband and wife, there was an ‘invalidating tendency’ i.e. although there was no Class 2(A) presumption of undue influence, the courts were more ready to find that I husband had exercised undue influence over his wife than in other cases. Scott LJ in the pra ent case also referred to the law treating married women ‘more tenderly’ than othen. Thll approach is based on dicta in early authorities. In Grigby v. Cox (1750) 1 Yes.Sen. 517 Lord
Hardwicke, whilst rejecting any presumption of undue influence, said that a court of equity
‘will have more jealousy’ over dispositions by a wife to a husband. In Yerkey v.Jon11(1939) 63 CLR 649, 675, Dixon J refers to this ‘invalidating tendency.’ He also refers to the court recog nising ‘the opportunities which a wife’s confidence in her husband gives him of unfairly or improperly procuring her to become surety:’ see 677.
In my judgment this special tenderness of treatment afforded to wives by the courts is prop erly attributable to two factors. First, many cases may well fall into the Oass 2(8) category of undue influence because the wife demonstrates that she placed trust and confidence in her hus band in relation to her financial affairs and therefore raises a presumption of undue influence. Second, the sexual and emotional ties between the parties provide a ready weapon for undue influence: a wife’s true wishes can easily be overborne because of her fear of destroying or dam aging the wider relationship between her and her husband if she opposes his wishes.
For myself, I accept that the risk of undue influence affecting a voluntary disposition by a wife in favour of a husband is greater than in the ordinary run of cases where no sexual or emo tional ties affect the free exercise of the individual’s will.
Undue influence, misrepresentation and third parties
Up to this point I have been considering the right of a claimant wife to set aside a transac tion as against the wrongdoing husband when the transaction has been procured by his undue influence. But in surety cases the decisive question is whether the claimant wife can set aside the transaction, not against the wrongdolng husband, but against the creditor bank. Of course, if the wrongdoing husband is acting as agent for the creditor bank in obtaining the surety from the wife, the creditor will be fixed with the wrongdoing of its own agent and the surety contract can be set aside as against the creditor. i\part from this, if the creditor bank has notice, actual or constructive, of the undue influence exercised by the husband (and consequentially of the wife’s equity to set aside the transaction) and the creditor will take subject to that equity and the wife can set aside the transaction against the creditor (albeit a purchaser for value) as well as against the husband: see Bainbrigge v. Browne (1881) 18 Ch.D 188 and Bank of Credit and Commerce International SA v. Aboody [1990] 1 Q!3 923, 973. Similarly, in cases such as the pres ent where the wife has been induced to enter into the transaction by the husband’s misrepre sentation, her equity to set aside the transaction will be enforceable against the creditor if either the husband was acting as the creditor’s agent or the creditor had actual or constructive notice. [His Lordship proceeded to consider the historical development of the law and then continued:]
Conclusions
(a) Wives
My staning point is to clarify the basis of the law. Should wives (and perhaps others) be accorded special rights in relation to surety transactions by the recognition of a special equity applicable only to such persons engaged in such transactions? Or should they enjoy only the same protection as they would enjoy in relation to their other dealings? In my judgment, the special equity theory should be rejected. First, I can find no basis in principle for affording spe cial protection to a limited class in relation to one type of transaction only. Second, to require the creditor to prove knowledge and understanding by the wife in all cases is to reintroduce by the back door either a presumption of undue influence of Class 2(A) (which has been decisively rejected) or the Romilly heresy (which has long been treated as bad law). Third, although Scott LJ found that there were two lines of cases one of which supported the special equity theory, on analysis although many decis”ions are not inconsistent with that theory the only two cases which support it are Yerkey v. Jones, 63 CLR 649, and the decision of the Court of Appeal in the present case. Finally, it is not necessary to have recourse to a special equity theory for the proper protection of the legitimate interests of wives as I will seek to show.
In my judgment, if the doctrine of notice is properly applied, there is no need for the intro duction of a special equity in these types of cases. A wife who has been induced to stand as a
surety for her husband’s debts by his undue influence, misrepresentation or some other legal wrong has an equity as against him to set aside that transaction. Under the ordinary principlee of equity, her right to set aside that transaction will be enforceable against third partie1 (e.1. against a creditor) if either the husband was acting as the third party’s agent or the third party had actual or constructive notice of the facts giving rise to her equity. Although there may be cases where, without anificiality, it can properly be held that the husband was acting as the agent of the creditor in procuring the wife to stand as surety, such cases will be of very rare occurrence. The key to the problem is to identify the circumstances in which the creditor will be taken to have had notice of the wife’s equity to set aside the transaction.
The doctrine of notice lies at the hean of equity. Given that there are two innocent panics, each enjoying rights, the earlier right prevails against the later right if the acquirer of the later right knows of the earlier right (actual notice) or would have discovered it had he taken proper steps (constructive notice). In particular, if the party assening that he takes free of the earlier rights of another knows of certain facts which put him on inquiry as to the possible existence of the rights of that other and he fails to make such inquiry or take such other steps as are rea sonable to verify whether such earlier right does or does not exist, he will have constructive notice of the earlier right and take subject to it. Therefore where a wife has agreed to stand surety for her husband’s debts as a result of undue influence or misrepresentation, the creditor will take subject to the wife’s equity to set aside the transaction if the circumstances are such as to put the creditor on inquiry as to the circumstances in which she agreed to stand surety.
It is at this stage that, in my view, the ‘invalidating tendency’ or the law’s ‘tender treatment’
of married women, becomes relevant. As I have said above in dealing with undue influence, this tenderness of the law towards married women is due to the fact that, even today, many wives repose confidence and trust in their husbands in relation to their financial affairs. This tender ness of the law is reflected by the fact that voluntary dispositions by the wife in favour of her husband are more likely to be set aside than other dispositions by her: a wife is more likely to establish presumed undue influence of Class 2(8) by her husband than by others because, in practice, many wives do repose in their husbands trust and confidence in relation to their finan cial affairs. Moreover the informality of business dealings between spouses raises a substantial risk that the husband has not accurately stated to the wife the nature of the liability she is under taking, i.e., he has misrepresented the position, albeit negligently.
Therefore in my judgment a creditor is put on inquiry when a wife offers to stand surety for her husband’s debts by the combination of two factors: (a) the transaction is on its face not to the financial advantage of the wife; and (b) there is a substantial risk in transactions ofthat kind that, in procuring the wife to act as surety, the husband has committed a legal or equitable wrong that entitles the wife to set aside the transaction.
It follows that unless the creditor who is put on inquiry takes reasonable steps to satisfy him self that the wife’s agreement to stand surety has been properly obtained, the creditor will have constructive notice of the wife’s rights.
What, then are the reasonable steps which the creditor should take to ensure that it does not have constructive notice of the wife’s rights, if any? Normally the reasonable steps necessary to avoid being fixed with constructive notice consist of making inquiry of the person who may have the earlier right (i.e. the wife) to see whether such right is asserted. It is plainly pouible to require of banks and other financial institutions that they should inquire of one spouae whether he or she has been unduly influenced or misled by the other. But in my judgment the creditor, in order to avoid being fixed with constructive notice, can reasonably be expected to take steps to bring home to the wife the risk she is running by standing as surety and to advile her to take independent advice. ….
I am conscious that in treating the creditor as having constructive notice because of the risk of Class 2(8) undue influence or misrepresentation by the husband I may be extending the law as stated by Fry Jin Bainhrigge v. Bro11J11e, 18 Ch. D 188, 197, and the Court of Appeal in the Ahoody case. Those cases suggest that for a third party to be affected by constructive notice of presumed undue influence the third party must actually know of the cir cumstances which give rise to a presumption of undue influence. In contrast, my view is that the risk of Class 2(8) undue influence or misrepresentation is sufficient to put the creditor on inquiry. But my statement accords with the principles of notice: if the known facts are such as to indicate the possibility of an adverse claim that is sufficient to put a third party on inquiry. If the law is established as I have suggested, it will hold the balance fairly between on the one hand the vulnerability of the wife who relies implicitly on her husband and, on the other hand, the practical problems of financial institµtions asked to accept a secured or unsecured surety obligation from the wife for her husband’s debts. In the context of suretyship, the wife will not have any right to disown her obligations. just because subsequently she proves that she did not fully understand the transaction: she will, as in all other areas of her affairs, be bound by her obligations unless her husband has, by misrepresentation, undue influence or other wrong, committed an actionable wrong against her. In the normal case, a financial institution will be able to lend with confidence in reliance on the wife’s surety obligation provided that it warns her (in the absence of the husband) of•the amount of her potential liability and of the risk of
standing surety and advises her to take independent advice.
Mr Jarvis, for the bank, urged that this is to impose too heavy a burden on financial institu tions. I am not impressed by this submission. The Report by Professor Jack’s Review Committee on Banking Services: Law and Practice (1989) (Cmnd. 622), recommended that prospective guarantors should be adequately warned of the legal effects and possible conse quences of their guarantee and of the importance of receiving independent advice. Pursuant to this recommendation, the Code of Banking Practice (adopted by banks and building societies in March 1992) provides in paragraph 12.l as follows:
‘Banks and building societies will advise private individuals proposing to give them a guar antee or other security for another person’s liabilities that: (i) by giving the guarantee or third party security he or she might become liable instead of or as well as that other per son; (ii) he or she should seek independent legal advice before entering into the guarantee or third party security. Guarantees and other third party security forms will contain a clear and prominent notice to the above effect.’
Thus good banking practice (which applies to all guarantees, not only those given by a wife) largely accord with what I consider the law should require when a wife is offered as surety. The only further substantial step required by law beyond that good practice is that the position should be explained by the bank to the wife in a personal interview. I regard this as being essen tial because a number of the decided cases show that written warnings are often not read and are sometimes intercepted by the husband. It does not seem to me that the requirement of a personal interview imposes such an additional administrative burden as to render the bank’s position unworkable.
(h) Other persons
I have hitherto dealt only with the position where a wife stands surety for her husband’s debts. But in my judgment the same principles are applicable to all other cases where there is an emotional relationship between cohabitees. The ‘tenderness’ shown by the law to married women is not based on the marriage ceremony but reflects the underlying risk of one cohabitee exploiting the emotional involvement and trust of the other. Now that unmarried cohabitation, whether heterosexual or homosexual, is widespread in our society, the law should recognise this. Legal wives are not the only group which are now exposed to the emotional pressure of cohabitation. Therefore if, but only if, the creditor is aware that the surety is cohabiting with the principal debtor, in my judgment the same principles should apply to them as apply to hus band and wife.
In addition to the cases of cohabitees, the decision of the Court of Appeal in Avon Finance Co. Ltd v. Bridger [1985) 2 All ER 281 shows (rightly in my view) that other relationships can give rise to a similar result. In that case a son, by means of misrepresentation, persuaded his elderly parents to stand surety for his debts. The surety obligation was held to be unenforce able by the creditor inter alia because to the bank’s knowledge the parents trusted the son in their financial dealings. In my judgment that case was rightly decided: in a case where the cred itor is aware that the surety reposes trust and confidence in the principal debtor in relation to his financial affairs, the creditor is put on inquiry in just the same way as it is in relation to hus band and wife.
Summary
I can therefore summarise my views as follows. Where one cohabitee has entered into an obligation to stand as surety for the debts of the other cohabitee and the creditor is aware that they are cohabitees: (1) the surety obligation will be valid and enforceable by the creditor unless the suretyship was procured by the undue influence, misrepresentation or other legal wrong of the principal debtor; (2) if there has been undue influence, misrepresentation or other legal wrong by the principal debtor, unless the creditor has taken reasonable steps to satisfy himself that the surety entered into the obligation freely and in knowledge of the true facts, the credi tor will be unable to enforce the surety obligation because he will be fixed with constructive notice of the surety’s right to set aside the transaction; (3) unless there are special exceptional circumstances, a creditor will have taken such reasonable steps to avoid being fixed with con structive notice if the creditor warns the surety (at a meeting not attended by the principal debtor) of the amount of her potential liability and of the risks involved and advises the surety to take independent legal advice.
I should make it clear that in referring to the husband’s debts I include the debts of a com pany in which the husband (but not the wife) has a direct financial interest.
The decision of this case
Applying those principles to this case, to the knowledge of the bank Mr and Mrs O’Brien were man and wife. The bank took a surety obligation from Mrs O’Brien, secured on the mat rimonial home, to secure the debts of a company in which Mr O’Brien was interested but in which Mrs O’Brien had no direct pecuniary interest. The bank should therefore have been put on inquiry as to the circumstances in which Mrs O’Brien had agreed to stand as surety for the debt of her husband. If the Burnham tiranch had properly carried out the instructions from Mr Tucker of the Woolwich branch, Mrs O’Brien would have been informed that she and the mat rimonial home were potentially liable for the debts of a company which had an existing liabil ity of £107,000 and which was to be afforded an overdraft facility of £135,000. If she had been told this, it would have counteracted Mr O’Brien’s misrepresentation that the liability was lim ited to £60,000 and would last for only three weeks. In addition according to the side letter she would have been recommended to take independent legal advice.
Unfortunately Mr Tucker’s instructions were not followed and to the knowledge of the bank (through the clerk at the Burnham branch) Mrs O’Brien signed the documents without any warning of the risks or any recommendation to take legal advice. In the circumstances the bank (having failed to take reasonable steps} is fixed with constructive notice of the wrongful mis representation made by Mr O’Brien to Mrs O’Brien. Mrs O’Brien is therefore entitled as· against the bank to set aside the legal charge on the matrimonial home securing her husband’s liability to the bank.
For these reasons I would dismiss the appeal.
CIBC Mortgages v. Pitt
[1994] 1 AC 200
Lord Browne-Wilkinson:
Manifest disadvantage
In the present case, the Court of Appeal as they were bound to, applied the law laid down in National Westminster Bank Pie. v. Morgan [1985) AC 686 as interpreted by the Court of Appeal in Bank of Credit and Commerce International SA v. Aboody [1990) l QB 923: a claim to set aside a transaction on the grounds of undue influence whether presumed (Morgan) or actual (Aboody) cannot succeed unless the claimant proves that the impugned transaction was manifestly dis advantageous to him. Before your Lordships, Mrs Pitt submitted that the Court of Appeal in Aboody erred in extending the need to show manifest disadvantage in cases of actual, as opposed to presumed, undue influence. Adopting the classification used in O’Brien’s case, ante, 189c-G,
.it is argued that although Morgan’s case decides that the claimant must show that the impugned
transaction was disadvantageous to him in order to raise the presumption of undue influence within class 2(A) or (B), there is no such requirement where it is proved affirmatively that the claimant’s agreement to the transaction was actually obtained by undue influence within Clau 1.
In the Morgan case it was alleged that Mrs Morgan had been induced to grant security to the bank by the undue influence of one of the bank’s managers. Mrs Morgan did not allep ac:tua1 undue influence within Class 1, but relied exclusively on a )’>resumption of undue influenoe within Class 2. It was held that the bank manager had never in fact assumed such a role U to raise any presumption of undue influence. However, in addition, it was held that Mn Morgan could not succeed because she had not demonstrated that the transaction was manifestly disad vantageous to her. Lord Scarman (who delivered the leading speech) rejected a submission that the presumption of undue influence was based on any public policy requirements. In reliance on the judgment of Lindley LJ in A/Icard v. Skinner (1887) 36 Ch.D 145 and the decision of the Privy Council in Poosathurai v. Kannappa Chettiar (1919) LR 47 Ind. App. 1, he laid down the following proposition [1985] AC 686, 704:
‘Whatever the legal character of the transaction, the authorities show that it must consti tute a disadvantage sufficiently serious to require evidence to rebut the presumption that in the circumstances of the relationship between the parties it was procured by the exer cise of undue influence. In my judgment, therefore, the Court of Appeal erred in law in holding that the presumption of undue influence can arise from the evidence of the rela tionship of the parties without also evidence that the transaction itself was wrongful in that it constituted an advantage taken of the person subjected to the influence which, failing proof to the contrary, was explicable only on the basis that undue influence had been exer cised to procure it.’
In the Aboody case [1990] 1 QB 923 the claimant had established that actual undue influence within Class 1 had been exercised to induce her to enter into the impugned transaction. That transaction was not manifestly di vantageous to her. The Court of Appeal, following a num ber of dicta in the Court of Appe:ll and a first instance decision subsequent to Morgan [1985] AC 686, held that the decision in Morgan applied as much to cases of Class 1 actual undue influ ence as to Class 2 presumed undue influence. They placed reliance on certain passages in Lord Scarman’s speech in Morgan which indicated a view that the demonstration of a manifest dis advantage was essential even in a Class 1 case. The Court of Appeal were initially impressed by a submission that, if manifest disl}dvantage had to be shown in all cases, an old lady who had been unduly influenced by her solicitor to sell him her family house but had been paid the full market price for it, would be unable to recover. However, they were satisfied that in such a case the old lady would have a remedy under what they regarded as a wholly separate doctrine of equity, viz., the right to set aside transactions obtained in abuse of confidence.
My Lords, I am unable to agree with the Court of Appeal’s decision in Aboody. I have no doubt that the decision in Morgan does not extend to cases of actual undue influence. Despite two references in Lord Scarman’s speech to cases of actual undue influence, as I read his speech he was primarily concerned to establish that disadvantage had to be shown, not as a constituent element of the cause of action for undue influence, but in order to raise a presumption of undue influence with Class 2. That was the only subject matter before the House of Lords in Morgan and the passage I have already cited was directed solely to that point. With the exception of a passing reference to Ormes v. Beade/ (1860) 2 Gif. 166, all the cases referred to by Lord Scarman were cases of presumed undue influence. In the circumstances, I do not think that this House can have been intending to lay down any general principle applicable to all claims of undue influence, whether actual or presumed.
Whatever the merits of requiring a complainant to show manifest disadvantage in order to raise a Oass 2 presumption of undue influence, in my judgment there is no logic in imposing such a requirement where actual undue influence has been exercised and proved. Actual undue influence is a species of fraud. Like any other victim of fraud, a person who has been induced by undue influence to carry out a transaction which he did not freely and knowingly enter into is entitled to have that transaction set aside as of right. No case decided before Morgan was cited (nor am I aware of any) in which a transaction proved to have been obtained by actual undue influence has been upheld nor is there any case in which a court has even considered whether the transaction was, or was not, advantageous. A man guilty of fraud is no more entitled to argue that the transaction was beneficial to the person defrauded than is a man who has procured a transaction by misrepresentation. The effect of the wrongdoer’s conduct is to prevent the wronged party from bringing a free will and properly informed mind to bear on the proposed transaction which accordingly must be set aside in equity as a matter of justice.
I therefore hold that a claimant who proves actual undue influence is not under the further burden of proving that the transaction induced by undue influence was manifestly disadvanta geous: he is entitled as of right to have it set aside.
I should add that the exact limits of the decision in Morgan may have to be considered in the future. The difficulty is to establish the relationship between the law as laid down in Morgan and the long standing principle laid down in the abuse of confidence cases viz. the law requires those in a fiduciary position who enter into transactions with those to whom they owe fiduciary duties to establish affirmatively that the transaction was a fair one: see for example Demerara Bauxite Co. Ltd v. Hubbard [1923] AC 673; Moody v. Cox [1917] 2 Ch. 71 and the discussion in the Aboody case [1990] 1 QJ3 923, 962-4. The abuse of confidence principle is founded on considerations of general public policy, viz. that in order to protect those to whom fiduciaries owe duties as a class from exploitation by fiduciaries as a class, the law imposes a heavy duty on fiduciaries to show the righteousness of the transactions they enter into with those to whom they owe such duties. This principle is in sharp contrast with the view of this House in Morgan that in cases of presumed undue influence (a) the law is not based on considerations of public policy and (b) that it is for the claimant to prove that the transaction was disadvantageous rather than for the fiduciary to prove that it was not disadvantageous. Unfortunately, the attention of this House in Morgan was not drawn to the abuse of confidence cases and therefore the inter action between the two principles (if indeed they are two separate principles) remains obscure: see also ‘The Limits of Undue Influence,’ David Tiplady (1985) 48 MLR 579; Wright v. Carter [1903] 1 Ch. 27.
Louth v. Diprose
(1992) 175 CLR 621
Brennan J: The jurisdiction of equity to set aside gifts procured by unconscionable conduct ordinarily arises from the concatenation of three factors: a relationship between the parties wh_i<;h, to the knowledge of the donee, places the donor at a special disadvantage vis-a-vis the donee; the donee’s unconscientious exploitation of the donor’s disadvantage; and the con sequent overbearing of the will of the donor whereby the donor is unable to make a worthwhile judgment as to what is in his or her best interest.’ A similar jurisdiction exists to set aside gifts procured by undue influence. In Commercial Bank of Australia Ltd v. Amadio,2 MasonJ distin
guished unconscionable conduct from undue influence in these terms:
‘In the latter the will of the innocent party is not independent and voluntary because it is overborne. In the former the will of the innocent party, even if independent and volun tary, is the result of the disadvantageous position in which he is placed and of the other party unconscientiously taking advantage of that position.’
Deane J identified the difference in the nature of the two jurisdictions:
‘Undue influence, like common law duress, looks to the quality of the consent or IUlftt the weaker party … Unconscionable dealing looks to the conduct of the stronger part)’ In attempting to enforce, or retain the benefit of, a dealing with a person under a special dl1- ability in circumstances where it is not consistent with equity or good conscience that he should do so.’
Although the two jurisdictions are distinct, they both depend upon the effect of influence (pre sumed or actual) improperly brought to bear by one party to a relationship on the mind of the other whereby the other disposes of his property. Gifts obtained by unconscionable conduct and gifts obtained by undue influence are set aside by equity on substantially the same basis. In White and Tudor’s Leading Cases in Equity,4 the notes to Huguenin v. Baseley5 treat the principle applied in cases of unconscionable conduct as an extension of the principle applied in cases of undue influence:6
‘The principle upon which equity will give relief as against the persons standing in [the categories of confidential] relations to the donor, will be extended and applied to all the variety of relations in which dominion may be exercised by one person over another.’
The ground for setting aside a gift obtained by unconscientious exploitation of a donor’s spe cial disadvantage, as explained in Amadio, can be compared with the ground for setting aside a gift obtained by undue influence, as explained by Dixon] in Johnson v. Buttress:1
‘The basis of the equitable jurisdiction to set aside an alienation of property on the ground of undue influence is the prevention of an unconscientious use of any special capac ity or opportunity that may exist or arise of affecting the alienor’s will or freedom ofjudgment in reference to such a matter. The source of power to practise such a domination may be found in no antecedent relation but in a particular situation, or in the ‘deliberate con trivance of the party. If this be so, facts must be proved showing that the transaction was the outcome of such an actual influence over the mind of the alienor that it cannot be consid ered his free act. But the parties may antecedently stand in a relation that gives to one an authority or influence over the other from the abuse of which it is proper that he should be protected.’ (Emphasis added.)
The similarity between the two jurisdictions gives to cases arising in the exercise of one juris diction an analogous character in considering cases involving the same points in the other juris diction.
The Relationship
There are some categories of confidential relationships from which a presumption of undue influence arises when a substantial gift is made by one party to the relationship to the other relationships such as solicitor and client, physician and patient, parent and child, guardian and ward, superior and member of a religious community.. Public policy creates a presumption of undue influence in cases where the relationship falls into one of the recognized categories. Those categories do not exhaust ti).e cases in which it may be held that it is contrary to con science for a donee to retain a gift. In cases where the relationship is not one of confidentiality, a gift may be impeached where the evidence shows that in fact it was procured by uncon scionable conduct. Where a gift is impeached on the ground that it was obtained by uncon scionable conduct consisting in an unconscionable exploitation of an antecedent relationship, the relationship is one in which one party stands in a position of special disadvantage vis-A-vii the other. Such relationships are infinitely various, the common feature being that the donor to the knowledge of.the donee, in a position of special disadvantage vis-a-vis the donee: that is to say, in matters in which their interests do not coincide, the donor’s capacity lo make a·
decision as to his or her own best interest is peculiarly susceptible to control or influence by the donee. As Mason J said in Amadio:8
‘I qualify the word “disadvantage” by the adjective “special” in order to disavow any sug gestion that the principle applies whenever there is some difference in the bargaining power of the parties and in order to emphasize that the disabling condition or circumstance is one which seriously affects the ability of the innocent party to make a judgment as to his own best interests, when the other party knows or ought to know of the existence of that condition or circumstance and of its effect on the innocent party.’
The relevant relationship may exist because of some weakness in the donor. Thus FullagarJ in Blomelyv.Ryan9 took as instances of weakness ‘poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary’. And McTiernanJ said that ‘[t]he essence of such weakness is that the party is unable to judge for himself’.10 It is unnecessary to show that the donee contributed to that weakness. In the present case … the relationship between the plaintiff (respondent) and the defendant (appellant) was so different in degree as to be different in kind from the ordinary relationship of a man courting a woman. It was found that the personal relationship between them was such that the plaintiff was extremely suscep tible to influence by the defendant, as the defend not knew.
Exploitation of the Donor’s Disadvantage ·
Equity intervenes ‘whenever one party to a transaction is at a special disadvantage in dealing with the other party … and the other party unconscientiously takes advantage of the opportu nity thus placed in his hands’.11 Citing this passage in Amadio,12 DawsonJ said:
‘What is necessary for the application of,the principle is exploitation by one party of another’s position of disadvantage in such a manner that the former could not in good con science retain the benefit of the bargain.’
What his Honour said of a bargain can be said equally of a gift.
In the present case, King CJ made explicit findings of an unconscientious exploitation by the defendant of the plaintiff’s weakness.
The Donor’s Will and Judgment
Whena donor who stands in a relationship of special disadvantage vis-a-vis a donee makesa substantial gift to the donee, slight evidence may be sufficient to show that the gift has been procured by unconscionable conduct. Whether that finding should be made depends on the cir cumstances. In Watkins v. Comhes13 Isaacs J said:
‘It is not the law, as I understand it, that the mere fact that one party to a transaction who is of full age and apparent competency reposed confidence in, or was subject to the influ ence of, the other party is sufficient to cast upon the latter the onus of demonstrating the validity of the transaction. Observations which go to that extent are too broad.’
But where it is proved that a donor stood in a specially disadvantageous relationship witha donee, that the donee exploited the disadvantage and that the donor thereafter madea sub stantial gift to the donee, an inference may, and often should, be drawn that the exploitation was the effective cause of the gift. The drawing of that inference, however, depends on the whole of the circumstances Such an inference must arise, however, from the faCII of the
case; it is not a presumption which arises by operation of law. The inference may be drawn unless the donee can rely on countervailing evidence to show that the donee’s exploitative con duct was not a cause of the gift. At the end of the day, however, it is for the party impeachin1 the gift to show that it is the product of the donee’s exploitative conduct. This is the final and necessary link in the chain of proof of unconscionable conduct leading to a decree setting aside the gift.
The plaintiff discharged that onus in the present case.
Deane J It has long been established that the jurisdiction of courts of equity to relieve against unconscionable dealing extends generally to circumstances in which (i) a party to a transaction was under a s cial disability in dealing with the other party to the transaction with the consequence that there was an absence of any reasonable degree of equality between them and (ii) that special disabil ity was sufficiently evident to the other party to make it prima facie unfair or ‘unconscionable’ that that other party procure, accept or retain the benefit of, the disadvantaged party’s assent to the impugned transaction in the circumstances in which he or she procured or accepted it. Where such circumstances are shown to have existed, an onus is cast upon the stronger party to show that the transaction was fair, just and reasonable: ‘the burthen of shewing the fairness of the transaction is thrown on the person who seeks to obtain’ or retain the benefit of it.
The adverse circumstances which may constitute a special disability for the purposes of the principle relating to relief against unconscionable dealing may take a wide variety of forms and are not susceptible of being comprehensively catalogued.16 In Blomley v. Ryan,17 Fullagar J listed some examples of such special disability: ‘poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary.’ As Fullagar J remarked, the common characteristic of such adverse circumstances ‘seems to be that they have the effect of placing one party at a serious disadvantage vis-a-vis the other’.
On the findings of the learned trial judge in the present case, the relationship between the respondent and the appellant at the time of the impugned gift was plainly such that the respon dent was under a special disability in dealing with the appellant. That special disability arose not merely from the respondent’s infatuation. It extended to the extraordinary vulnerability of the respondent in the false ‘atmosphere of crisis’ in which he believed that the woman with whom he was ‘completely in love’ and upon whom he was emotionally dependent was facing eviction from her home and suicide unless he provided the money for the purchase of the house. The appellant was aware of that special disability. Indeed, to a significant extent, she had delib erately created it. She manipulated it to her advantage to influence the respondent to make the gift of the money to purchase the house. When asked for restitution she refused. From the respondent’s point of view, the whole transaction was plainly a most improvident one.
In these circumstances, the learned trial judge’s conclusioil’that the appellant had been guilty of unconscionable conduct in procuring and retaining the gift of $59,206.55 was not only open to him. In the context of his Honour’s findings of fact, it was inevitable and plainly correct. On those findings, the case was not simply one in which the respondent had, under the influence of his love for, or infatuation with, the appellant, made an imprudent gift in her favour. The case was one in which the appellant deliberately used that love or infatuation and her own deceit to create a situation in which she could unconscientiously manipulate the respondent to part with a large proportion of his property. The intervention of equity is not merely to relieve the plaintiff from the consequences of his own foolishness. It is to prevent his victimization.18
Fry v. Lane
(1888) 40 Ch. D 312
Kay J: ……
The most common case for the interference of a Court of Equity is that of an expectant heir, reversioner, or remainderman who is just of age, his youth being treated as an important cir cumstance. Another analogous case is where the vendor is a poor man with imperfect educa tion, as in Evans v. Llewellin;11 Haygarth v. Wearing.12
In the case of a poor man, in distress for money, a sale, even of property in possession, at an undervalue has been set aside in many cases. [His Lordship discussed the cases and continued:] The result of the decisions is that where a purchase is made from a poor and ignorant man at a con siderable undervalue, the vendor having no independent advice, a Court of Equity will set aside the transaction. This will be done even in the case of property in possession, and a fortiori if the interest be
reversionary.
The circumstances of poverty and ignorance of the vendor, and absence of independent advice, throw upon the purchaser, when the transaction is impeached, the onus of proving, in Lord Selborne’s words, that the purchase was ‘fair, just, and reasonable.’
Upon the evidence before me I cannot hesitate to conclude that the price of £ 170 in J. B. Fry’s case and £270 in George Fry’s case were both considerably below the real value. The prop erty has been subjected to the costs of appointing new trustees, and also to part of the costs of an administration suit, and yet the net produce of one-fifth share is £730. Managed in a more careful manner it might have produced more.
Both}. B. Fry and his brother George were poor, ignorant men, to whom the temptation of the immediate possession of £100 would be very great. Neither of them in the transaction of the sale of his share, was, in the words of Sir J. Leach, ‘on equal terms’ with the purchaser. Neither had independent advice. The solicitor who acted for both parties in each transaction seems, from the Law List, to have been admitted in March, 1877. In October, 1878, at the time of completing the sale of J. B. Fry’s share, he had not been much more than a year and a-half on the roll. His inexperience probably in some degree accounts for his allowing himself to be put in the position of solicitor for both parties in such a case. I think in each transaction he must have been considering the purchaser’s interest too much properly to guard that of the ven dors Iregret that I must come to the conclusion that, though there was a semblance of bar
gaining by the solicitor in each case, he did not properly protect the vendors, but gave a great advantage to the purchasers, who had been former clients, and for whom he was then acting. The circumstances illustrate the wisdom and necessity of the rule that a poor, ignorant man, selling an interest of this kind, should have independent advice, and that a purchase from him at an undervalue should be set aside, if he has not. The most experienced solicitor, acting for both sides, if he allows a sale at an undervalue, can hardly have duly performed his duty to the vendor. To act for both sides in such a case, and permit a sale at an undervalue, is a position in which no careful practitioner would allow himself to be placed….
Creswell v. Potter
[1978] 1 WLR 255,
Megarry J: The judge thus laid down three requirements. What has to be considered is, first, whether the plaintiff is poor and ignorant; second, whether the sale was at a considerable undervalue; and third, whether the vendor had independent advice. I am not, of course, suggesting that these are the only circumstances which will suffice; thus there may be circumstances of oppression or abuse of confidence which will invoke the aid of equity. But in the present case only these three requirements are in point. Abuse of confidence, though pleaded, is no longer relied on; and no circumstances of oppression or other matters are alleged. I must therefore consider whether the three requirements laid down in Fry v. Lane are satisfied,
I think that the plaintiff may fairly be described as falling within whatever is the modern equivalent of’poor and ignorant.’ Eighty years ago, when Fry v. Lane was decided, social con ditions were very different from those which exist today. I do not, however, think that the prin ciple has changed, even though the euphemisms of the 20th century may require the word ‘poor’ to be replaced by ‘a member of the lower income group’ or the like, and the word ‘igno rant’ by ‘less highly educated.’ The plaintiff has been a van driver for a tobacconist, and is a Post Office telephonist. The evidence of her means is slender. The defendant told me that the plaintiff probably had a little saved, but not much; and there was evidence that her earnillp were about the same as the defendant’s, and that these were those of a carpenter. The plaintiff also has a legal aid certificate.
In those circumstances I think the plaintiff may properly be described as ‘poor’ in the senae used in Fry v. Lane, where it was applied to a laundryman who, in 1888, was earning £1 a week. In this context, as in others, I do not think that ‘poverty’ is confined to destitution. Further, although no doubt it requires considerable alertness and skill to be a good telephonist, I think that a telephonist can properly be described as ‘ignorant’ in the context of property transactions in general and the execution of conveyancing documents in particular. I have seen and heard the plaintiff giving evidence, and I have reached the conclusion that she satisfies the require ments of the first head. ·
The second question is whether the sale was at a ‘considerable undervalue.’ Slate Hall cost £1,500, £1,200 of the price being provided by the mortgage. The release recited that £1,196 13s. 5d remained outstanding on the mortgage, so that very little had been paid off the capital sum due. Nevertheless, all that the plaintiff was getting for giving up her half interest in Slate Hall was the release from her liability under the mortgage. If Slate Hall was worth no more than it cost, she was giving up her half share in any equity worth £300; and, after all, the mortgage was a recent mortgage to a well-known building society. If she had sought advice it is unlikely in the extreme that she would have been told that there was any real probability that the value of the property would be less than the sum due under the mortgage. There can be little doubt that she was getting virtually nothing for £150.
In fact, as is now known, within a little over two years the property fetched £3,350, so that at the time in question the plaintiff’s share of the equity may have been worth appreciably more than £150. It is true, as Mr Balcombe pointed out on behalf of the defendant, that there was no valuation evidence before me, and that any valuation of the property must rest upon inferences from the prices for which the property was sold. I do not think it right to assume, without evi dence, that there was a dip in the value of the property between its purchase in November 1958, and the sales in December 1960, and September 1961; and without such a dip it seems to me that the probabilities point to the property having a value in August 1959, which at all events substantially exceeded the sum due under the mortgage for £1,200. The more valuable the equity, of course, the less valuable would be the indemnity against the mortgage. It seems to me that by the release the plaintiff parted with her interest in Slate Hall at an undervalue which cannot be dismissed as being trifling or inconsiderable. In my judgment the undervalue was ‘considerable.’
As for independent advice, from first to last there is no suggestion that the plaintiff had any. The defendant, his solicitor and the inquiry agent stood on one side; on the other the plaintiff stood alone. This was, of course, a conveyancing transaction, and English land law is notori ously complex. I am certainly not saying that other transactions, such as hire-purchase agree ments, are free from all difficulty. But the authorities put before me on setting aside dealings at an undervalue all seem to relate to conveyancing transactions, and one may wonder whether the principle is confined to such transactions, and, if so, why. I doubt whether the principle is restricted in this way; and it may be that the explanation is that it is in conveyancing matters that, by long usage, it is regarded as usual, and, indeed, virtually essential, for the parties to have the services of a solicitor. The absence of the aid of a solicitor is thus, as it seems to me, of especial significance if a conveyancing matter is involved. The more usual it is to have a solic itor, the more striking will be his absence, and the more closely will the courts scrutinise what was done.
Mr Balcombe points out that the plaintiff was not bereft of possible legal assistance; for on
or before July 28, 1959, when she was having difficulty in getting some furniture and efTecta from Slate Hall, she consulted a Colchester firm of solicitors, who wrote a letter dated July 28, 1959, that produced the required result. If she wanted legal advice, he said, this show1 that heknew how to get it. However, what matters, I think, is not whether she could have obtained proper advice but whether in fact she had it; and she did not. Nobody, of course, can be com pelled to obtain independent advice: but I do not think that someone who seeks to uphold what is, to him, an advantageous conveyancing transaction can do so merely by saying that the other party could have obtained independent advice, unless something has been done to bring to the notice of that other party the true nature of the transaction and the need for advice.
At the end of the day, my conclusion is that this transaction cannot stand. In my judgment the plaintiff has made out her case, and so it is for the defendant to prove that the transaction was ‘fair, just, and reasonable.’ This he has not done. The whole burden of his case has been that the requirements of Fry v. Lane, 40 Ch. D 312, were not satisfied, whereas I have held that they were.
Boustany v. Pigott
(1995) 69 P & CR 298,
Lord Templeman: … In a careful and thoughtful submission, Mr Robertson, who appeared before the Board on behalf of Mrs Boustany, made the following submissions with which their Lordships are in general agreement:
(1) It is not sufficient to attract the jurisdiction of equity to prove that a bargain is hard, unreasonable or foolish; it must be proved to be unconscionable, in the sense that ‘one of the parties to it has imposed the objectionable terms in a morally reprehensible manner, that is to say, in a way which affects his conscience’: Multiservice Bookbinding v. Marden.1
(2) ‘Unconscionable’ relates not merely to the terms of the bargain but to the behaviour of the stronger party, which must be characterised by some moral culpability or impropriety: Lobb (Alec) (Garages) Limited v. Total Oil (Great Britain) Limited.2
(3) Unequal bargaining power or objectively unreasonable terms provide no basis for equi table interference in the absence of unconscientious or extortionate abuse of power where exceptionally, and as a matter of common fairness, ‘it was not right that the strong should be allowed to push the weak to the wall’: Lobb (Alec) (Garages) Limited v. Total Oil (Great Britain) Limited.3
(4) A contract cannot be set aside in equity as ‘an unconscionable bargain against a party innocent of actual or constructive fraud. Even if the terms of the contract are ‘unfair’ in the sense that they are more favourable to one party than the other (‘contractual imbalance’), equity will not provide relief unless the beneficiary is guilty of unconscionable conduct: Hart v. 0 ‘Connor4 applied in Nichols v. Jessup.5
(5) ‘In situations of this kind it is necessary for the plaintiff who seeks relief to establish
unconscionable conduct, namely that unconscientious advantage has been taken of his disabling condition or circumstances’: per Mason J in Commercial Bank of Australia Ltd v. Amadio.6
Mr Robertson submitted that Miss Pigott had received independent advice from Mr Kendall, that she had been made aware by Mr Kendall that the terms of the 1980 lease were disadvantageous to her, that Miss Pigott could not be described as poor or ignorant and that the judge did not find and could not, consistently with the evidence, have found unconscionable behaviour on the part of Mrs Boustany.
The crucial question in this case is-what brought Miss Pigott to the chambers of Mr Kendall in September 1980? That question was not answered by direct evidence because Miss Pigott was not able to give evidence and Mrs Boustany and her husband chose not to do so. The trial judge inferred unconscionable conduct by Mrs Boustany after careful consideration of a number of features which he held were only consistent with unconscientious conduct on the part of Mrs Boustany. The management of the property had been given up by Miss Pigott because of her incapacity. The properties were managed by Mr George Pigott and there was no reason why Miss Pigott should interfere in the management of this one property leased to Mrs Boustany. There was no evidence of any personal attachment between Miss Pigott and her ten ant. Mrs Boustany had negotiated with Mr George Pigott and knew that he was the represen tative of Miss Pigott. No advice was sought by Miss Pigott; she turned up not at her family’s solicitors but to Mr Kendall who knew nothing about her save that he had prepared the 1976 lease. Miss Pigott gave to Mr Kendall, according to his evidence, absurd reasons for the grant of a new lease and no reason for the grant of a lease for 20 years on disadvantageous terms.
Miss Pigott must have been under a total misapprehension of the facts when she represented that she might be worried about the property and about the repair of the property while she was away. Mr Kendall forcibly pointed out not only to Miss Pigott but also to Mrs Boustany and her husband the disadvantages to Miss Pigott of the new lease but Mrs Boustany and her hut band gave no explanation and offered no concessions. The were content to allow Miss Piptt ostensibly to insist on the unjustifiable terms which they must have already persuaded her to unconscionable bargain.
When a writ was issued Mrs Boustany did not write to the solicitor but sought out Miss Pigott and obtained a disclaimer which the court in due course rejected. The inference which the trial judge drew, and which he was entitled to draw, was that Mrs Boustany and her hus band had prevailed upon Miss Pigott to agree to grant a lease on terms which they knew they could not extract from Mr George Pigott or anyone else. When they were summoned by Mr Kendall and the unfairness of the lease was pointed out to them, they did not release Miss Pigott from the bargain which they had unfairly pressed on her. In short Mrs Boustany must have taken advantage of Miss Pigott before, during and after the interview with Mr Kendall and with full knowledge before the 1980 lease was settled that her conduct was unconscionable.
Earl of Aylesford v. Morris
(1873) 8 Ch. App. 484
Lord Selbome, LC: There is hardly any older head of equity than that described by Lord Hardwicke in Earl of Chesterfield v. Janssen1 as relieving against the fraud ‘which infects catch ing bargains with heirs, reversioners, or expectants, in the life of the father,’ &c. ‘These (he said) have been generally mixed cases,’ and he proceeded to note two characters always found in them. ‘There is always fraud presumed or inferred from the circumstances or conditions of the parties contracting-weakness on one side, usury on the other, or extortion, or advantage taken of that weakness. There has been always an appearance of fraud from the nature of the bargain.’
Fraud does not here mean deceit or circumvention; it means an unconscientious use of the power arising out of these circumstances and conditions; and when the relative position of the parties is such as prima facie to raise this presumption, the transaction cannot stand unless the person claiming the benefit of it is able to repel the presumption by contrary evidence, proving it to have been in point of fact fair, just, and reasonable.
This is the rule applied to the analogous cases of voluntary donations obtained for themselves by the donees, and to all other cases where influence, however acquired, has resulted in gain to the person possessing at the expense of the person subject to it. Lord Cranworth, in a recent case in the House of Lords (Smith v. Kay2), said that no influence can be more direct, more intelligible, or more to be guarded against than that of a person who gets hold of a young man of fortune, ‘and takes upon himself to supply him with means, pandering to his gross extrava gance during his minority, and extorting from him, or at least obtaining from him, for every advance that he has made, a promise that the moment he comes of age it shall all be ratified, so as to make the securities good.’ The circumstances of the particular case in which these words were spoken differed widely from those of the case now before us; the element of personal influ ence is here wanting. But it is sufficient for the application of the principle, if the parties meet under such circumstances as, in the particular transaction, to give the stronger party dominion
over the weaker; and such power and influence are generally possessed, in every transaction of this kind, by those who trade upon the follies and vices of unprotected youth, inexperience, and moral imbecility.
In the cases of catching bargains with expectant heirs, one peculiar feature has been almoet universally present; indeed, its presence was considered by Lord Brougham to be an indispena able condition of equitable relief, though Lord St. Leonards, with good reason, dissents from that opinion.3 The victim comes to the snare (for this system of dealing does set snara, not, perhaps, for one prodigal more than another, but for prodigals generally as a class), excluded, and known to be excluded, by the very motives and circumstances which attract him, from the help and advice of his natural guardians and protectors, and from that professional aid which would be accessible to him, ifhe did not feel compelled to secrecy. He comes in the dark, and in fetters, without either the will or the power to take care of himself, and with nobody else to take care of him. Great Judges have said that there is a principle of public policy in restraining this; that this system of undermining and blasting, as it were, in the bud the fortunes of fami lies, is a public as well as a private mischief; that it is a sort of indirect fraud upon the heads of families from whom these transactions are concealed, and who may be thereby induced to dis pose of their means for the profit and advantage of strangers and usurers, when they suppose themselves to be fulfilling the moral obligation of providing for their own descendants.
Whatever weight there may be in any such collateral considerations, they could hardly pre vail, if they did not connect themselves with an equity more strictly and directly personal to the Plaintiff in each particular case. But the real truth is, that the ordinary effect of all the circum stances by which these considerations are introduced, is to deliver over the prodigal helpless into the hands of those interested in taking advantage of his weakness; and we so arrive in every such case at the substance of the conditions which throw the burden of justifying the right eousness of the bargain upon the party who claims the benefit of it….
Alec Lobb (Garages) Ltd v. Total Oil (Great Britain) Ltd
[1985] I WLR 173
Dillon LJ: … I tum therefore to the appellants’ case on equitable grounds. The basis of the contention that the transaction of the lease and lease-back ought to be set aside in equity is that it is submitted, and in the court below was accepted on behalf of Total, that during the nego tiations for the lease and lease-back the parties did not have equal bargaining power, and it is therefore further submitted that a contract between parties who had unequal bargaining power can only stand and be enforced by the stronger ifhe can prove that the contract was in point of fact fair, just and reasonable. The concept of unequal bargaining power is taken particularly from the judgment of Lord Denning MR in Lloyds Bank Ltd v. Bundy [1975] QB 326. The ref erence to a contract only standing if it is proved to have been in point of fact fair, just and rea sonable is taken from the judgment of Lord Selbome LC in Earl of Aylesford v. Mo”is (1873) LR 8 Ch. App. 484, 490-1. Lord Selbome was not there seeking to generalise; he was dealing only with what he regarded as one of the oldest heads of equity, relieving against fraud pno tised on heirs or expectants, particularly fraud practised on young noblemen of great expecta tions, considerable extravagance and no ready money. It is none the less submitted that the logic of the development of the law leads to the conclusion that Lord Selborne LC’s test should now be applied generally to any contract entered into between parties who did not have equal bar gaining power.
In fact Lord Denning MR’s judgment in Lloyds Bank Ltd v. Bundy merely laid down the
proposition that where there was unequal bargaining power the contract could not stand if the weaker did not have legal advice. In the present case Mr Lobb and the company did have sep arate advice from their own solicitor. On the facts of this case, however, that does not weaken the appellants’ case if the general proposition of law which they put forward is valid. Total refused to accept any of the modifications of the transaction as put forward by Total which the company’s and Mr Lobb’s solicitor suggested, and in the end the solicitor advised them not to proceed. Mr Lobb declined to accept that advice because his and the company’s financial diffi culties were so great, and, it may be said, their bargaining power was so small, that he felt he had no alternative but to accept Total’s terms. Because of the existing valid tie to Total which had, as I have said, three to four years to run, he had no prospect at all of raising finance on the scale he required from any source other than Total. There is no suggestion that there was any other dealer readily available who could have bought the property from him subject to the tie. The only practical solutions open to him were to accept the terms of the lease and lease-back as put forward by Total on which Total was not prepared to negotiate, or to sell the freehold of the property to Total and cease trading. In these circumstances, it would be unreal, in my judg ment, to hold that if the transaction is otherwise tainted it is cured merely because Mr Lobb and the company had independent advice.
But on the deputy judge’s findings can it be said that the transaction is tainted? Lord Selbome LC dealt with the case before him as a case of fraud. He said, at pp. 490 1:
‘The usury laws, however, proved to be an inconvenient fetter upon the liberty of com mercial transactions; and the arbitrary rule of equity as to sales of reversions was an imped iment to fair and reasonable, as well as to unconscionable, bargains. Both have been abolished by the legislature; but the abolition of the usury laws still leaves the nature of the bargain capable of being a note of fraud in the estimation of this court; and the Act as to sales of reversions (31 Viet. c. 4) is carefully limited to purchases ‘made bona fide and without fraud or unfair dealing,’ and leaves under-value still a material element in cases in which it is not the sole equitable ground for relief. These changes of the law have in no degree whatever altered the onus probandi in those cases, which, according to the language of Lord Hardwicke, raise “from the circumstances or conditions of the parties contract ing-weakness on one side, usury on the other, or extortion, or advantage taken of that weakness”-a presumption of fraud. Fraud does not here mean deceit or circumvention; it means an unconscientious use of the power arising out of these circumstances and con ditions; and when the relative position of the parties is such as prima facie to raise this pre sumption, the transaction cannot stand unless the person claiming the benefit of it is able to repel the presumption by contrary evidence, proving it to have been in point of fact fair, just, and reasonable.’
The whole emphasis is on extortion, or undue advantage taken of weakness, an unconscienriou1 use of the power arising out of the inequality of the parties’ circumstances, and on unconscien tious use of power which the court might in certain circumstances be entitled to infer from I particular and in these days notorious-relationship unless the contract is proved to hive been in fact fair, just and reasonable. Nothing leads me to suppose that the course of the development of the law over the last 100 years has been such that the emphasis on unconscionable conduct or unconscientious use of power has gone and relief will now be granted in equity In I such as the present if there has been unequal bargaining power, even if the stronger party used his strength unconscionably. I agree with the judgment of Browne-Wilkinson J, in Mullistrvice Bookbinding Ltd v. Marden (1979] Ch. 84, which sets out that to establish that a term is unfair and unconscionable it is not enough to show that it is, objectively, unreasonable. In the present case there are findings of fact by the deputy judge that the conduct of Total was not unconscionable, coercive or oppressive. There is ample evidence to support those find ings and they are not challenged by the appellants. Their case is that the judge applied the wrong test; where there is unequal bargaining power, the test is, they say, whether its terms are fair, just and reasonable and it is unnecessary to consider whether the conduct of the stronger party was oppressive or unconscionable. I do not accept the appellants’ proposition of law. In
my judgment the findings of the judge conclude this ground of appeal against the appellants. Inequality of bargaining power must anyhow be a relative concept. It is seldom in any nego
tiation that the bargaining powers of the parties are absolutely equal. Any individual wanting to borrow money from a bank, building society or other financial institution in order to pay his liabilities or buy some property he urgently wants to acquire will have virtually no bargaining power; he will have to take or leave the terms offered to him. So, with house property in a seller’s market, the purchaser will not have equal bargaining power with the vendor. But Lord Denning MR did not envisage that any contract entered into in such circumstances would, without more, be reviewed by the courts by the objective criterion of what was reasonable: see Lloyds Bank Ltd v. Bundy [1975]@ 326,336′.The courts would only interfere in exceptional cases where as a matter of common fairness it. was not right that the strong should be allowed to push the weak to the wall. The concepts of unconscionable conduct and of the exercise by the stronger of coercive power are thus brougbt in, and in the present case they are negatived by the deputy judge’s findings.
Even if, contrary to my view just expressed, the company and Mr and Mrs Lobb had ini tially in 1969 a valid claim in equity to have the lease and lease-back set aside as a result of the inequality of bargaining power, that claim was, in my judgment, barred by laches well before the issue of the writ in this action.
DunnLJ:
Equitable relief
Mr Cullen conceded that he could not bring himself within any of the established categories of equitable relief, but relied on the dictum of Lord Denning MR in Lloyds Bank Ltd v. Bundy (1975] QB 326,339 and submitted that the circumstances of this case disclosed a classic case of inequality of bargaining power of which the defendants had taken advantage by entering into the transaction, although he did not suggest any pressure or other misconduct on their part. He submitted that if it was necessary to categorise the grant of relief sought, it was an uncon scionable bargain. He reminded us that the categories of unconscionable bargains are not closed (per Browne-Wilkinson Jin Multiservice Bookbinding Ltd v. Marden [1979] Ch. 94, 110) and sought to distinguish the instant case from that case by submitting that here the plaintiffs were under a compelling necessity to accept the loan, so that misconduct by the defendants was unnecessary. The fact of their impecuniosity, that they were already tied to the defendants by mortgages, that there was no other source of finance, and that they could not sell the equities of redemption under the mortgages without giving up trading, coupled with the knowledge of the defendants of those facts, rendered the transaction unconscionable, and placed the onus upon the defendants to show that its terms were fair and reasonable.
I find myself unable to accept those arguments. Mere impecuniosity has never been held a ground for equitable relief. In this case no pressure was placed upon the plaintiffs. On the con trary the defendants were reluctant to enter into the transaction. The plaintiffs took independ ent advice from their solicitors and accountants. They went into the transaction with their eyes open, and it was of benefit to them because they were enabled to continue trade from the
for a number of years. In my view the judge was right to refuse equitable relief.
The Medina
(1876) 1 P 272, Probate Division
Sir Robert Phillimore: The circumstances of this case are very singular; but it is one in which the Court really feels no doubt as to the judgment which it ought to give. It is not necessary that I should go into an examination of the authorities which I recently referred to in the case of The Cargo Ex Woosung,1 and which I also referred to in the case of The Waver/ey.2 But I may state the result of them to be this, that i the practice of this Court, partly for the protection of absent owners and partly on the grounds of general policy, to control agreements made by masters when an examination of those agreements shews that they are clearly inequitable. In the present case there were upwards of five hundred pilgrims on a rock which is just six feet above water. Their ship had gone to pieces, and the plaintiffs’ vessel, the Timor, came up close without any difficulty or danger at all; because the evidence is that the water was quite deep up to the rock; she came up and her captain, in effect, says, I will not relieve you from this situ ation, which a few hours of bad weather might convert into one of most imminent danger, indeed into your total destruction. I will not take you away unless you give me 4000/. Now, what is 4000/. with regard to the matter saved, which is human life? On the other hand, however, 4000/. is the whole sum that was to be paid for conveying the pilgrims toJedda, and in my opin ion if the master of the Timor had not taken these pilgrims off the rock in the circumstances stated, and bad weather had come on, and they had lost their lives in consequence, he would hardly have been in a better position than a pirate. Nevertheless, it was certainly a valuable sal vage service according to the principles upon which such services have always been considered in this Court, but I am of opinion that 4000/. is a great deal too much, and I shall award 1800/. As to the costs there has been no tender, and I shall leave each party to pay their own costs. If there had been a sufficient tender, I should have given the defendants their costs. I shall not give costs on either side.
The Port Caledonia and The Anna
[1903] P 184
BucknillJ: … With the 1000/. agreement on one side, and that which I think was the value of the services on the other, I have to ask myself whether the bargain that was made was so inequitable, so unjust, and so unreasonable that the Court cannot allow it to stand?
The first question to consider is, What was the position of the two persons who made the agreement? The position was this. One man M’as in a position to insist upon his terms, and the other man had to put up with it. He could not help himself. He says in his letter to his owners: ‘He demanded 1000/. to take me away. I offered him 100/., or to leave it to the owners; but he would not agree, so I agreed to give 1000/. rather than foul the Anna.’ He appreciated the pos sibility of fouling the Anna if the weather had remained bad, and if the wind had remained in the S.W., neither of which things happened. So he found himself obliged to give way to a per son who would not move him, and who would have allowed him and the Anna to drift towards the rocks, and who would, I think, have seen them go there without putting a hawser on board unless he got a promise of 1000/.
I have expressed my opinion about the matter. This opinion is shared by the Elder Brethren, and I hold that this agreement cannot be allowed to stand, and I set it aside.
I hope that those who perform such grand services in tugs from time to time, in worse weather than this, and, in peril of their own lives, save property around the coast, will note that this Court will keep a firm hand over them if they attempt to do what has been done in this case. This was an inequitable, extortionate, and unreasonable agreement, and I think that the ser vices rendered will be well rewarded by the sum of 200/., and with county court costs.
Credit Lyonnais Bank Nederland NV v Burch
[1996] EWCA Civ 1292 (20
LORD JUSTICE NOURSE:
This is a case in which it is sought to set aside a mortgage of residential property given as security for another’s debt on the ground that it was procured by the undue influence of the debtor over the mortgagor of which the mortgagee had notice. Thus although the relationship between the debtor and the mortgagor was not that of persons living together but employer and employee, it may broadly be said to fall under Barclays Bank plc v. O’Brien [1994] 1 AC 180. At the same time the terms of the mortgage were so harsh and unconscionable as to make it hardly necessary for a court of equity to rely on that decision as a basis for avoiding the transaction.
It is convenient to start by stating those of the facts, as agreed or found by Mr Recorder Harrod in the court below, which are no longer in dispute. I can do so mainly in the learned recorder’s own words. In 1982 the defendant, Helen Burch, then aged 18, began to work for companies controlled by an Italian national called Andrea Pelosi. He was ten years older than she and she trusted him. She knew him to be a successful businessman and visited his substantial house in Gerrards Cross and his large villa in Italy. Her links with him were close. In addition to working for him during the day, she did baby-sitting at his home in the evenings and visited the family at weekends and for holidays in Italy. By the summer of 1990 Miss Burch was working for a company called AP International Travel Ltd. (“API”), which carried on Mr Pelosi’s tour operating business. It was a very demanding job and she was deeply involved in it. At that time she had almost no life apart from her work and was often there until 10 o’clock at night.
In 1985 Miss Burch, with the assistance of a mortgage from the Halifax Building Society, had acquired a lease for 125 years from 25th March 1970, at an annual ground rent of £25 rising to £45, of a second floor one-bedroomed flat and garage at 8 Cornerways, Sudbury Court Road, Wembley, Middlesex. In about June 1990, API being in financial difficulties, Mr Pelosi asked Miss Burch to put up her property as collateral security for its overdraft with the plaintiff, Credit Lyonnais Bank Nederland NV (“the Bank”). She agreed to do so.
In evidence before the recorder was an internal memorandum of the Bank from Mr David Herod, the manager of its London office, to Mr D. Jones, in which it was stated that API required a facility of £270,000 as opposed to the £250,000 they were then working to. Mr Herod added that the Bank was offered additional security in the form of a charge on Miss Burch’s property, which was valued at £100,000 but was subject to a first mortgage of £30,000.
On 5th July the Bank wrote to Belmont & Lowe, solicitors, informing them that Miss Burch had agreed to grant a second legal charge over the property to secure the borrowing of API and asking them to act for it on its behalf in connection with the transaction. Enclosed with the letter was the Bank’s standard form of third party legal mortgage. The letter stated:
“Miss Burch should, of course, be advised to take independent legal advice.”
On 9th July Belmont & Lowe replied, accepting the instructions. The recorder thought that they had probably been suggested by Mr Pelosi to the Bank because they had offices in London EC1, close to his own place of business.
Also on 9th July, Mr Martyn Whaley, a partner in Belmont & Lowe, wrote to Miss Burch at 8 Cornerways, informing her that they had been instructed by the Bank in relation to the second legal charge over her home. He said:
“Strictly speaking our instructions are to act for the bank. We must advise you that you should take separate legal advice upon the documentation you will be asked to sign and the underlying reasons behind the request and of course the potential risks you may face. …
Finally although I am acting for the bank I feel I must mention to you the fact that the document that you are being asked to sign is unlimited both in amount and in time. Is this actually what has been agreed?”
On 16th July Mr Whaley telephoned Miss Burch and told her that he was unable to proceed until he received the title deeds from the Halifax Building Society. On the same day he wrote to her, referring to that conversation and his letter of 9th July. He said:
“Could I please ask you to let me have written confirmation that notwithstanding what I have said in my letter of 9th July you still wish to proceed in this matter and that you will be taking separate legal advice on the documentation involved.
I do not want to labour the point but you should be aware that the document you are being asked to sign is unlimited both in time and in amount and there is no provision or agreement so far as I am aware relating to you being released by the bank at any time in the near future.
I look forward to hearing from you.”
On 17th July Mr Whaley wrote to Mr Pelosi, asking for £50 on account of search fees as quickly as possible. On 18th July Mr Pelosi replied, enclosing a cheque for £50 as requested. The letter ended:
“I would like to thank you for your kind co-operation, and I would be grateful if you could do your utmost to expedite the completion of this matter.”
That letter was typed or printed on headed writing paper showing Mr Pelosi’s business address in London EC1.
Also on 18th July, Miss Burch signed a typed or printed letter addressed to Mr Whaley, bearing her own address at 8 Cornerways. Although the recorder made no finding on the point, this letter appears to have been typed or printed on the same instrument as Mr Pelosi’s letter of the same date. It reads:
“Thank you for your letter of 16 July, the contents of which I have noted.
With reference to your letter of 9 July, I would like to confirm that I am fully aware of the implication of offering my property as a collateral for the increased overdraft facilities made available by CL Bank Nederland to AP International Travel Ltd. I also understand that such guarantee is unlimited both in time and amount, and I wish to offer such guarantee on this basis.
I further understand from your recent conversation with Mr Pelosi that there is no objections to myself signing the necessary documents prior to the completion of your searches, and to this effect I would be grateful if you could call me on Tel 071 278 5319, to arrange a suitable time for me to come to your office.”
The recorder found that Miss Burch had discussed Mr Whaley’s letters to her of 9th and 16th July with Mr Pelosi and that he either prepared her reply of 18th July for her or told her the effect of what he wanted her to say.
On Friday 20th July Miss Burch went with Mr Pelosi to Belmont & Lowe’s offices nearby and executed the legal charge. On Monday 23rd July Mr Whaley wrote to Miss Burch:
“RE: AP INTERNATIONAL TRAVEL LIMITED.
I refer to our meeting last week. I have now spoken to CL Bank Nederland in relation to the Charge and they have confirmed what I told you and that is to say that the Charge is both unlimited in time and in amount. The Charge is to back a facility granted to AP International Travel Limited which is reviewed yearly.”
The transaction was completed on 3rd August, the legal charge being dated accordingly. By 10th August Belmont & Lowe’s fees had been duly paid, either by API or by Mr Pelosi himself. On 12th October 1990 Belmont & Lowe wrote to the Halifax Building Society informing them that registration of the legal charge had been completed.
The legal charge, which was executed in the standard form sent by the Bank to Belmont & Lowe on 5th July, was made between Miss Burch as mortgagor of the one part and the Bank as mortgagee of the other part. The obligations assumed by Miss Burch were onerous in the extreme. The first part of clause 2 provides:
“[Miss Burch] HEREBY COVENANTS with the Bank to pay satisfy and discharge to the Bank on demand all such sums of money and liabilities whether certain or contingent which are now or at any time hereafter may be due owing or incurred by [API] to the Bank or for which [API] may be or become liable on any current or other account or in any manner whatever and whether alone or jointly with any other or others in partnership or otherwise and in whatever names style or firm and whether as principal surety or otherwise anywhere upon any account or in respect of bills of exchange cheques notes or other instruments drawn endorsed or accepted by [API] or for any other reason whatsoever together with interest to the date of repayment commission banking charges legal and other costs charges and expenses …”
Clause 3 provides for the Bank’s costs, charges and expenses to be charged on the mortgaged property. By clause 4 Miss Burch charged the property by way of legal mortgage with the payment to the Bank of the principal money, liabilities, interest and other moneys thereby covenanted to be paid by her.
API’s financial difficulties were not resolved and in due course it went into liquidation. By August 1992 Mr Pelosi’s house in Gerrards Cross had been sold and he had gone to live in Italy. From the beginning of June 1993 the Bank unsuccessfully pressed him to make firm proposals for the repayment of API’s residual debt, which then stood in the region of £56,000. On 18th April 1994 it made a formal demand on Miss Burch under the legal charge in the sum of £60,249.12. That was followed by a solicitor’s letter on 29th June and a visit by Miss Burch to the Bank on 5th July, at which Mr Herod recorded her as remaining very loyal to Mr Pelosi and confident that the Bank would be repaid. In early September she went to Italy to see what could be done. She came back with a letter from Mr Pelosi to Mr Herod brimming with charm and airy promises and a cheque for £700. The Bank required Mr Pelosi thereafter to make monthly payments of £750, but none was made.
On 21st April 1994 the Bank issued proceedings for possession and payment against Miss Burch in the Willesden County Court. By that time it had closed its London office and was acting through the agency of Hampshire Trust PLC. On 25th September 1995 Miss Burch put in a defence and counterclaim, in which she alleged that she was induced to enter into the legal charge as a result of a misrepresentation made by Mr Pelosi, further or alternatively, by the undue influence he had exerted over her. She further alleged that the Bank, further or alternatively its agents Belmont & Lowe, were on notice, actual or constructive, of the misrepresentation and undue influence. She denied the Bank’s right to possession of the property and counterclaimed for a declaration that the legal charge was unenforceable against her.
The action came for trial before Mr Recorder Harrod on 12th November 1995. On the following day he gave judgment for Miss Burch and made an order dismissing the Bank’s application and setting the legal charge aside. He gave Miss Burch her costs on scale 2 and granted the Bank leave to appeal to this court.
The recorder heard evidence from Miss Burch and Mr Whaley. Neither Mr Herod nor any other officer or employee of the Bank gave evidence. Indeed the two affidavits put in on behalf of the Bank were sworn by an employee of Hampshire Trust PLC, who had no first-hand knowledge of the events of June and July 1990 and gave no second-hand evidence of them either. When tendered for cross-examination he merely confirmed that he had no first-hand knowledge. Mr Pelosi did not give evidence.
The recorder found that Mr Pelosi had explained to Miss Burch before 26th June 1990 that API was in financial difficulties, that it needed to extend its overdraft with the Bank by £20,000 and that, if he could not provide collateral security for the extension, API would fail and Miss Burch would be out of a job. He was, however, satisfied that Mr Pelosi did not tell Miss Burch the extent of API’s borrowing. In other words, he did not tell her that the current borrowings were at least £163,000, that the limit already stood at £250,000 and that the proposal was to extend it to £270,000. The recorder also found that, in order to reassure Miss Burch, Mr Pelosi told her that his own house in England and his villa in Italy could be sold to pay off all the debts but that the Bank would not lend up to one hundred per cent of their value. He told Miss Burch that in consequence her mortgage would not be called on.
Having made those findings, the recorder rejected the case based on misrepresentation. It has not been sought to revive it in this court. Turning to the case based on undue influence, the recorder found without hesitation that there existed between Mr Pelosi and Miss Burch such a relationship of trust and confidence as to raise a presumption of undue influence; he said that if she had been seeking to set aside the legal charge as against API, she would certainly have succeeded. As between Miss Burch and the Bank, he found that the Bank knew that she was only an employee of API and, further, that the transaction was manifestly to her disadvantage; it knew that Mr Pelosi was putting forward, as the provider of collateral security for a possible debt of £270,000, an employee of his company who had no interest in it as shareholder or director. He held that that was notice of facts which put the Bank on enquiry. I respectfully agree.
Applying Barclays Bank v. O’Brien, the recorder then considered whether the Bank had taken reasonable steps to satisfy itself that Miss Burch’s agreement to stand surety had been properly obtained. He answered that question in the negative. Having observed that Miss Burch had been told repeatedly that the mortgage was unlimited in time and amount, he said:
“Was this enough? I do not think so. What the defendant was not told was that the guarantee would cover the borrowing of the company, whatever facilities might later be given it, and, more important, she was not told what the proposed facilities were. It would have been very simple to inform the solicitors and ask them to pass on to the defendant that the company’s facility was £250,000 and that this was to be increased to £270,000. Those figures would have been required by any competent adviser advising the defendant about the wisdom of the transaction and without them it was impossible for her to give an informed consent to the transaction.”
In that passage the recorder identified, although without pejorative comment, the truly astonishing feature of this case. Under the terms of the legal charge Miss Burch was required not simply to pledge her home as security for the £20,000 extension; she was required to pledge it without limit. Worse than that, she was required to enter into a personal covenant guaranteeing not simply repayment of the additional £20,000, nor even repayment up to the new limit of £270,000; she was required to guarantee without limit repayment of all API’s borrowings from the Bank, present and future and of whatever kind, together with interest, commission, charges, legal and other costs, charges and expenses. All that was required as the price of extending the limit by no more than £20,000 and, be it remembered, of someone who was a mere employee of API, to whom the only detriment in API’s collapse would have been the loss of her job. It could not have helped the Bank to say that it used its standard form. A mortgagee who uses such a form without regard to its impact on the individual case acts at his peril.
On that state of facts it must, I think, have been very well arguable that Miss Burch could, directly against the Bank, have had the legal charge set aside as an unconscionable bargain. Equity’s jurisdiction to relieve against such transactions, although more rarely exercised in modern times, is at least as venerable as its jurisdiction to relieve against those procured by undue influence. In Fry v. Lane (1888) 40 ChD 312, where sales of reversionary interests at considerable undervalues by poor and ignorant persons were set aside, Kay J, having reviewed the earlier authorities, said, at p.322:
“The result of the decisions is that where a purchase is made from a poor and ignorant man at a considerable undervalue, the vendor having no independent advice, a Court of Equity will set aside the transaction.
This will be done even in the case of property in possession, and a fortiori if the interest be reversionary.
The circumstances of poverty and ignorance of the vendor, and absence of independent advice, throw upon the purchaser, when the transaction is impeached, the onus of proving, in Lord Selborne’s words, that the purchase was ‘fair, just, and reasonable’.”
Lord Selborne’s words will be found in Earl of Aylesford v. Morris (1873) 8 Ch.App. 484, 491. The decision of Megarry J in Cresswell v. Potter [1978] 1 WLR 255, where he suggested that the modern equivalent of “poor and ignorant” might be “less highly educated members of the lower income group”, demonstrates that the jurisdiction is in good heart and capable of adaptation to different transactions entered into in changing circumstances; see also the interesting judgment of Balcombe J in Backhouse v. Backhouse [1978] 1 WLR 243, 250-252, where he suggested that these cases may come under the general heading which Lord Denning MR referred to in Lloyds Bank Ltd. v. Bundy [1975] QB 326, 339 as “inequality of bargaining power.”
A case based on an unconscionable bargain not having been made below, a decision of this court cannot be rested on that ground. But the unconscionability of the transaction remains of direct materiality to the case based on undue influence. Since it was so manifestly disadvantageous to Miss Burch, the Bank could not be said to have taken reasonable steps to avoid being fixed with constructive notice of Mr Pelosi’s undue influence over her when neither the potential extent of her liability had been explained to her nor had she received independent advice.
As to the first of those requirements, I agree with the recorder that it was not enough for Miss Burch to be told repeatedly that the mortgage was unlimited in time and amount. She could not assess the significance of that without being told of the extent of API’s current borrowings and the current limit. She might have thought that the limit was only being extended from £10,000 to £30,000. Had she known that API’s failure could have exposed her, on the figures then current, to the loss of her home and a personal debt of £200,000 on top, her reaction would have been very different.
As to the second requirement, it was not enough for Miss Burch to be advised to take independent legal advice. It was at the least necessary that she should receive such advice. That is because the first thing an independent solicitor would have done, on looking at clause 2 of the draft legal charge, was to enquire as to the extent of API’s current borrowings and the current limit and, on receiving the answers, to advise Miss Burch that she should not on any account enter into a transaction in that form.
In her valiant argument on behalf of the Bank Miss Purkis, in addition to disputing the recorder’s decision in regard to the matters already discussed, attacked his finding that there existed between Mr Pelosi and Miss Burch such a relationship of trust and confidence as to raise a presumption of undue influence. There was ample evidence on which that finding could be made. Indeed, the recorder’s findings as to how Miss Burch’s letter of 18th July came to be written suggest that this could have been treated as a case of actual undue influence. In any event, that part of his decision is as unassailable as any other. This is as clear a case for the setting aside of a transaction as against a mortgagee as it is possible to think of. The appeal is hopeless and must be dismissed.
LORD JUSTICE MILLETT:
This transaction cannot possibly stand.
This is sufficiently demonstrated by a recital of the principal facts. Mr. Pelosi was the alter ego of his company. The company ran a small business and had an overdraft facility with its bank. The overdraft was operating within an agreed limit of £250,000. Mr. Pelosi asked the bank to increase the limit of the facility to £270,000. The bank agreed but required additional security to be provided. So far the story is familiar, even commonplace. What follows, I hope, is not.
Mr. Pelosi provided the bank with an unlimited all moneys guarantee given by the Respondent at his request. She was a junior employee of the company employed at a modest wage. She was not a director of the company or shareholder in it. Her guarantee was supported by a second charge on her home, a small flat of suitably modest value which was valued at £100,000 and was subject to a mortgage of £30,000. She understood that the guarantee and charge were unlimited in time and amount, but she had not taken independent legal advice.
No court of equity could allow such a transaction to stand. The facts which I have recited are sufficient to entitle the Respondent to have the transaction set aside as against Mr. Pelosi and the Company. Every one of those facts was known to the bank when it accepted the security. The bank must accordingly be taken to have had notice of the Respondent’s equity, and must submit to the transaction being set aside against it also.
An eighteenth century Lord Chancellor would have contented himself with saying as much. It is an extreme case. The transaction was not merely to the manifest disadvantage of the Respondent; it was one which, in the traditional phrase, “shocks the conscience of the court.” The Respondent committed herself to a personal liability far beyond her slender means, risking the loss of her home and personal bankruptcy, and obtained nothing in return beyond a relatively small and possibly temporary increase in the overdraft facility available to her employer, a company in which she had no financial interest. The transaction gives rise to grave suspicion. It cries aloud for an explanation.
The Respondent did not seek to have the transaction set aside as a harsh and unconscionable bargain. To do so she would have had to show not only that the terms of the transaction were harsh or oppressive, but that “one of the parties to it has imposed the objectionable terms in a morally reprehensible manner, that is to say, in a way which affects his conscience”: Multi-Service Bookbinding Ltd. v. Monden [1979] Ch. 84, 110 per Browne-Wilkinson J; and see Alec Lobb Ltd. v. Total Oil [1983] 1 WLR 87 at pp. 94-5 where I pointed out that there must be some impropriety, both in the conduct of the stronger party and in the terms of the transaction itself, but added that “the former may often be inferred from the latter in the absence of an innocent explanation.”
In the present case the bank did not obtain the guarantee directly from the Respondent. It was provided to the bank by Mr. Pelosi, who obtained it from the Respondent by the exercise of undue influence. In such a context the two equitable jurisdictions (to set aside harsh and unconscionable bargains and to set aside transactions obtained by undue influence) have many similarities. In either case it is necessary to show that the conscience of the party who seeks to uphold the transaction was affected by notice, actual or constructive, of the impropriety by which it was obtained by the intermediary, and in either case the court may in a proper case infer the presence of the impropriety from the terms of the transaction itself.
In saying this I do not dissent from the observations of Sir John Salmond in Brusewitz v Brown [1923] NZLR 1106 at p. 1109-10 where he said:
“The mere fact that a transaction is based on an inadequate consideration or is otherwise improvident, unreasonable or unjust is not in itself any ground on which the Court can set it aside as invalid. Nor is such a circumstance in itself even a sufficient ground for a presumption that the transaction was the result of fraud, misrepresentation, mistake or undue influence, so as to place the burden of supporting the transaction upon the person who profits by it. The law in general leaves every man at liberty to make such bargains as he pleases, and to dispose of his own property as he chooses. However improvident, unreasonable, or unjust such bargains or dispositions may be, they are binding on every party to them unless he can prove affirmatively the existence of one of the recognised invalidating circumstances, such as fraud or undue influence.”
But Sir John proceeded to describe an important exception:
“Where there is not merely an absence or inadequacy of consideration for the transfer of property, but there also exists between the grantor and the grantee some special relation of confidence, control, domination, influence or other form of superiority, such as to render reasonable a presumption that the transaction was procured by the grantee by some unconscientious use of his power over the grantor, the law will make that presumption…. The commonest and most important instances of this presumption are those cases in which the relation between the parties is some recognised legal relationship of confidence, such as that existing between solicitor and client and between trustee and beneficiary. The rule, however, is not limited to any exclusive and defined list of recognised legal relations. It is quite general in its application. The question in each case is…did there exist between [the parties] such a relation of superiority on the one side and inferiority on the other (whatever the source or nature of that superiority or inferiority may be), and therefore such an opportunity and temptation for the unconscientious abuse of the power and influence so possessed by the superior party, as to justify the legal presumption
that such an abuse actually took place and that the transaction was procured thereby?”
This is an early description of the threefold classification adopted by the Court of Appeal in Bank of Credit Commerce International SA v Aboody [1900] 1 QB 923, 953, which was approved by the House of Lords in Barclays Bank plc v O’Brien [1994] 1 AC 180,189. This classifies cases of undue influence in three categories: Class 1 where the complainant proves affirmatively that she was induced to enter into the transaction by the exercise of undue influence upon her; Class 2A where she need prove, in the first instance, only the existence of a relationship between her and the wrongdoer of a kind which is sufficient in law to give rise to a rebuttable presumption that any transaction between them which is favourable to the wrongdoer has been obtained by the exercise of undue influence; and Class 2B where she must prove the existence in fact of a relationship between her and the wrongdoer which, although not of a kind which falls within Class 2A, was one under which the complainant was accustomed to repose trust and confidence in the wrongdoer, in which case the same rebuttable presumption arises. The difference between Class 2A and Class 2B is that in the former case there is an irrebuttable presumption of law that the relationship is one of trust and confidence; in the latter this must be proved as a fact. (I refer throughout for convenience to the complainant as a woman and the wrongdoer as a man, because that is the present case; but it is not of course always the case.)
In the present case the only relationship between Mr. Pelosi (and his company) on the one hand and the Respondent on the other which has been proved (and of which the bank had any knowledge) was that of employer and junior employee. That is not a relationship within Class 2A. At the same time, it is clearly one which is capable of developing into a relationship of trust and confidence with the attendant risk of abuse, particularly in the case of a small business where the parties are accustomed to work closely together.
Accordingly, it was for the Respondent to prove that the relationship between her and Mr. Pelosi had developed into a relationship of trust and confidence. Whether it had done so or not was a question of fact. While she had to prove this affirmatively, she did not have to prove it as a primary fact by direct evidence. It was sufficient for her to prove facts from which the existence of a relationship of trust and confidence could be inferred. In the present case the excessively onerous nature of the transaction into which she was persuaded to enter, coupled with the fact that she did so at the request of and after discussion with Mr. Pelosi, is in my judgment quite enough to justify the inference, which is really irresistible, that the relationship of employer and employee had ripened into something more and that there had come into existence between them a relationship of trust and confidence which he improperly exploited for his own benefit.
I do not accept the bank’s submission that this conclusion is inconsistent with the authorities. I repeat that the mere fact that a transaction is improvident or manifestly disadvantageous to one party is not sufficient by itself to give rise to a presumption that it has been obtained by the exercise of undue influence; but where it is obtained by a party between whom and the complainant there is a relationship like that of employer and junior employee which is easily capable of developing into a relationship of trust and confidence, the nature of the transaction may be sufficient to justify the inference that such a development has taken place; and where the transaction is so extravagantly improvident that it is virtually inexplicable on any other basis, the inference will be readily drawn.
The bank submitted that in the absence of evidence that there was a sexual or emotional tie between Mr. Pelosi and the Respondent the facts were insufficient to justify the Judge’s finding that there was a relationship of confidence between them; and that, in the absence of evidence that the bank was aware of such a tie between Mr. Pelosi and the Respondent, the facts known to the bank were insufficient to fix it with notice of the existence of a relationship of trust and confidence between them. I do not accept this. The presence of a sexual or emotional tie would at least make the transaction explicable. A wife might well consider (and be properly advised) that it was in her interest to provide a (suitably limited) guarantee of her husband’s business borrowings and to charge it on her interest in the matrimonial home, even if she had no legal interest in the company which owned the business. Her livelihood and that of her family would no doubt depend on the success of the business; and a refusal to entertain her husband’s importunity might put at risk the marital relationship as well as the continued prosperity of herself and her family. Similar considerations would no doubt influence a cohabitee and her adviser.
But the Respondent had no such incentive to induce her to enter into the transaction. No competent solicitor could possibly have advised her to enter into it. He would be bound to warn her against it in the strongest possible terms, and to have refrained from acting for her further if she had persisted in it against his advice: see Powell v Powell, [1900] 1 Ch.243,247.
The bank had actual notice of the facts from which the existence of a relationship of trust and confidence between Mr.Pelosi and the Respondent could be inferred. It knew that they were respectively employer and junior employee working in a small business, and should have “appreciated that the possibility of influence existed”: see Avon Finance Co. Ltd. v Bridger [1985] 2 All ER 281 at p. 288 per Brandon LJ. It also knew that the Respondent was neither a shareholder nor a director of the company and, so far as it knew, had no incentive to enter into the transaction which was entirely for his benefit and to her detriment. This was sufficient to put the bank on inquiry. It probably appreciated this, or it would not have encouraged the Respondent to take legal advice.
The bank submitted that it had discharged its duty to the Respondent by urging her to obtain independent legal advice. This does not accurately reflect the legal position. The bank owed no duty to the Respondent. If it urged the Respondent to take independent legal advice, this was for its own protection. If it had not had cause to suspect that the Respondent’s agreement to enter into the transaction might have been improperly obtained, it would have had no need to encourage her to take legal advice. Since it did have cause to suspect it, it could not avoid the consequences unless two conditions were satisfied: (i) it must have taken reasonable steps to allay any such suspicion; and (ii) the result of the steps which it took must be such as would reasonably allay any such suspicion.
The bank urged the Respondent to obtain independent legal advice. In a letter obviously written at the instance of Mr. Pelosi and after consultation with him, she declined to do so. The bank had taken all reasonable steps open to it to allay any suspicion it might have had that the Respondent’s agreement to the transaction had been procured by the exercise of undue influence on the part of Mr. Pelosi. But what followed could not reasonably have allayed any such suspicion; on the contrary it should have confirmed it.
That is sufficient to dispose of this appeal, but I should not be taken to accept that it would necessarily have made any difference even if the Respondent had entered into the transaction after taking independent legal advice. Such advice is neither always necessary nor always sufficient. It is not a panacea. The result does not depend mechanically on the presence or absence of legal advice. I think that there has been some misunderstanding of the role which the obtaining of independent legal advice plays in these cases.
It is first necessary to consider the position as between the complainant and the alleged wrongdoer. The alleged wrongdoer may seek to rebut the presumption that the transaction was obtained by undue influence by showing that the complainant had the benefit of independent legal advice before entering into it. It is well established that in such a case the court will examine the advice which was actually given. It is not sufficient that the solicitor has satisfied himself that the complainant understands the legal effect of the transaction and intends to enter into it. That may be a protection against mistake or misrepresentation: it is no protection against undue influence. As Lord Eldon said in Huguenin v Baseley (1807),14 Ves. 273: “the question is not whether she knew what she was doing, had done or was proposing to do, but how the intention was produced.”
Accordingly, the presumption cannot be rebutted by evidence that the complainant understood what she was doing and intended to do it. The alleged wrongdoer can rebut the presumption only by showing that the complainant was either free from any undue influence on his part or had been placed, by the receipt of independent advice, in an equivalent position. That involves showing that she was advised as to the propriety of the transaction by an adviser fully informed of all the material facts: see Powell v Powell (supra); Brusewitz v Brown (supra); Permanent Trustee Co. of New South Wales Ltd. v Bridgewater [1936] 3 All ER 501,507; Bester v Perpetual Trustee Co. Ltd. [1970] 3 NSWR 30.
Some of those cases were concerned with the equity to set aside a harsh and unconscionable bargain rather than one obtained by the exercise of undue influence, but the role of the independent adviser, while not identical, is not dissimilar. The solicitor may not be concerned to protect the complainant against herself, but he is concerned to protect her from the influence of the wrongdoer. The cases show that it is not sufficient that she should have received independent advice unless she has acted on that advice; if this were not so, the same influence that produced her desire to enter into the transaction would cause her
to disregard any advice not to do so. They also show that the solicitor must not be content to satisfy himself that his client understands the transaction and wishes to carry it out. His duty is to satisfy himself that the transaction is one which his client could sensibly enter into if free from improper influence; and if he is not so satisfied to advise her not to enter into it, and to refuse to act further for her if she persists. He must advise his client that she is under no obligation to enter into the transaction at all and, if she still wishes to do so, that she is not necessarily bound to accept the terms of any document which has been put before her but (where this is appropriate) that he should ascertain on her behalf whether less onerous terms might be obtained.
It is next necessary to consider the position of
the third party who has been put on enquiry of the possible existence of some impropriety and who wishes to avoid being fixed with constructive notice. One means of doing so is to ensure that the complainant obtains competent and independent legal advice before entering into the transaction. If she does so, and enters into the transaction nonetheless, the third party will usually escape the consequences of notice. This is because he is normally entitled to assume that the solicitor has discharged his duty and that the complainant has followed his advice. But he cannot make any such assumption if he knows or ought to know that it is false.
In the present case the bank did not have actual notice of the exercise of undue influence, or even of the existence of a relationship of trust and confidence between the Respondent and Mr. Pelosi. It did not know for a fact that the Respondent had no incentive to enter into the transaction. For all the bank knew, for example, the parties might be intending to set up home together and live off the profits of the company’s business. It did not, therefore, know (as was the case) that no competent solicitor could possibly advise the Respondent to guarantee the company’s overdraft.
But it must have known that no competent solicitor could advise her to enter into a guarantee in the terms she did. He would be bound to enquire, of the bank if necessary, of the reason why it required additional security. Having discovered that it was to enable the limit of the company’s overdraft to be increased from £250,000 to £270,000, he would be bound to advise the Respondent that an unlimited guarantee was unnecessary and inappropriate for this purpose, and that, if she felt that she must accommodate Mr. Pelosi’s wishes, she should offer a limited guarantee with a limit of £20,000 or ( better still) a guarantee of the company’s liability in excess of £250,000 with a maximum of £270,000. The terms of the Respondent’s letters indicate that if she had been given appropriate advice of the alternatives which were legally available, she would have chosen one which was less onerous to her while still meeting the bank’s ostensible requirements.
I do not, therefore, accept that a bank, in circumstances where it ought to appreciate the possibility that undue influence has been exercised, can escape the consequences by putting forward an unnecessarily onerous form of guarantee and relying on the failure of the guarantor’s solicitor to advise her of the possibility of offering a guarantee on less onerous terms and more appropriate to the situation.
In the present case the bank accepted an unlimited guarantee of her employer’s indebtedness obtained by the employer from a junior employee with no incentive to give it; and who had, at the instance of her employer, declined to obtain legal advice, was known to be concerned at the unlimited nature of the obligation which she was undertaking, and was almost certainly unaware of the alternatives open to her. In my opinion the transaction must be set aside and the appeal must be dismissed.
LORD JUSTICE SWINTON THOMAS:
I have had the advantage of reading the judgment of Nourse, L.J. I agree with it and gratefully adopt his recitation of the material facts.
In considering the issues as to whether there was a relationship of trust and confidence giving rise to a presumption of undue influence between Miss Burch and Mr. Pelosi, whether the Bank had express or constructive notice of that relationship, and whether the Bank had discharged its duty towards Miss Burch, it is necessary to consider the material facts in the round. In my judgment the important facts were these:
(1) Miss Burch was a young woman in her twenties.
(2) She was an employee of the company A.P.I. (There was no suggestion of any emotional relationship between her and Mr. Pelosi).
(3) She was a relevantly junior employee, a Booking Clerk, earning £12,000 to £14,000 per annum.
(4) She lived in a flat valued at £100,000 with a mortgage of £30,000, and consequently an equity of £70,000.
(5) She was being asked to enter into a charge whereby she made herself liable to discharge the liability of the Company to the Bank in the sum of £270,000, and mortgaged her home to the Bank.
(6) At the time that she entered into the charge, the indebtedness of the Company to the Bank was at least £163,000 and was likely to rise to £270,000 as the Company required an increase in their Bank overdraft facility from £250,000 to £270,000.
(7) Miss Burch was not at any time told of the company’s current indebtedness to the Bank, or the extent of the overdraft facility being granted.
I have no hesitation in upholding the Recorder’s finding that there was, on the facts of this case, a relationship of trust and confidence as between Mr. Pelosi and Miss Burch giving rise to a presumption of undue influence, and there was no evidence to rebut that presumption. I accept the submission made by Miss Purkis on behalf of the Bank that the Courts must be cautious in their application of the principles set out by Lord Browne-Wilkinson in his speech in Barclays Bank v. O’Brien [1994] 1 AC 180. If they are not, then Banks, in their turn, will become over-cautious in granting overdraft facilities to the detriment of their customers. Certainly, in many cases, no presumption will arise in the case of an employer/employee relationship. However in this case the facts speak for themselves, and, in my judgment any neutral bystander, looking at the facts without evidence in rebuttal, would have no difficulty in drawing the overwhelming inference that there was undue influence by Mr. Pelosi on his young employee.
As to notice, Mr. Herod, the Manager of the relevant Branch of the Bank, who arranged the overdraft facilities knew all the facts set out above except, perhaps, (3). Even as to those facts, he certainly would have known that Miss Burch was a relatively junior employee, and that she could not have been earning a very large salary. On the basis of those facts, it would have been well open to the Recorder to find that Mr. Herod had actual knowledge of the relationship of trust and confidence. I would have thought that it would cause a Bank Manager to raise his eyebrows more than a little when he was engaged in entering into a contract with a young employee which involved guaranteeing her employer’s indebtedness in the sum of £270,000, and mortgaging her home to the Bank. Be that as it may, there can be no doubt that the facts known to Mr. Herod were amply sufficient to put him on inquiry as to whether or not there was a relationship of trust and confidence, as in Avon Finance Company Ltd. v. Bridger [1985] 2 All E.R. 281.
The third issue is whether the Bank discharged its duty to Miss Burch. It is true that the Bank by letters dated 9th and 16th July, 1990, advised Miss Burch that the charge was unlimited in time and amount and advised her that she should take independent legal advice. What the Bank failed to tell her, and undoubtedly should have told her, was the extent of the company’s present indebtedness and, even more important, that she was exposing herself to a potential liability of £270,000 which would, of course, involve the loss of her home. Furthermore, I have no doubt that in these circumstances they should have insisted that she took independent legal advice before entering into the charge. If she had taken advice, an independent Solicitor would certainly have advised her as strongly as he could that she should in no circumstances enter into the mortgage.
For these reasons, and for the reasons given by Nourse, L.J. and Millett, L.J., I too would dismiss this appeal.
Order: appeal dismissed with costs; legal aid taxation of the respondent’s costs.
Gregg v. Kidd
[1956] IR 183
Budd J.
In these proceedings the plaintiff seeks to set aside a deed of the 28th September, 1953, whereby George Gregg, since deceased, in consideration of his affection for his nephew, John George Kidd, transferred his farm, situate at Tinryland in County Carlow, to William Gregg Kidd to hold in trust for the settlor for his life and in remainder in trust for John George Kidd (usually known as Jack Kidd) in fee simple.
Some months prior to the execution of the deed the settlor had made his will, dated the 20th March, 1953, whereby he devised all his property to his brother, Richard, for life and after his death to his nephew, Mark Gregg, the plaintiff. He appointed Richard Gregg and Mark Gregg his executors. He died on the 29th December, 1953, being then about 59 years of age. Richard Gregg pre-deceased him, but Mark Gregg, as sole surviving executor, proved the will on the 2nd April, 1954, and thereafter launched these proceedings.
The defendants are the trustee and beneficiary under the deed, respectively, and are both sons of Mrs. Hannah Kidd, a sister of the settlor. She and her family reside at Bohermore, near Bagenalstown, where they have a farm. John George Kidd is a young man of about 30 years of age.
It is alleged by the plaintiff that at the time of the making of the deed the settlor was reduced by mental ill-health or physical and mental debility to a state of helplessness and was at the time residing in the house of the defendants and their mother, Mrs. Hannah Kidd, and under their care; that the deed was improvident and was thus executed when the parties were not on equal terms. The deceased, it is alleged, was not competent by reason of mental illness to comprehend the nature and effect of the settlement. It is also alleged that the deed was obtained by the undue influence brought to bear upon the deceased by the defendants or on their behalf by Mrs. Hannah Kidd, Mr. Dawson Miller or one or other of them. These allegations the defendants deny and claim that the deed constitutes a valid settlement.
George Gregg acquired the farm by a transfer from his brother, Richard, on the 13th January, 1928, subject to a charge in favour of Richard for £500. He occupied the lands thereafter up to about a year before his death. In January, 1953, he was living at Tinryland, but being in bad health he went to reside with his brother, Richard, in his house at Kilmeany and was also for a time with his sister, Mrs. Miller, at Shamrock Lodge, Carlow. He returned later to Kilmeany, Richard’s place, and while there he had a stroke on the 26th February, 1953, which paralysed his left side. From the 26th February to the 13th March, 1953, he was in Carlow Infirmary. From then until the 1st May, 1953, he was in the Meath Hospital in Dublin under the care of Dr. Mayne. While in the Meath Hospital George Gregg made the will I have already referred to. From the Meath Hospital he returned to Carlow and went to reside again with his sister Mrs. Miller. She went to London on holidays at the end of May, 1953, and on the 27th May George Gregg was taken to Mrs. Hannah Kidd’s house at Bohermore. While he was there he had two further serious relapses, (probably strokes, but that is uncertain) one in the beginning, and another at the end, of June. He remained in his sister’s, Mrs. Kidd’s, house until he died on the 29th December, 1953.
During the early part of his illness George Gregg was attended by Dr. Seale who had known him for about thirty years. Dr. Seale, in the course of his evidence, stated that when he had the stroke George Gregg’s left side became paralysed and for a time he could not speak. He had improved somewhat in May. Dr. Seale saw the patient for the last time on the 11th August, 1953, and I shall refer later to his evidence as to his condition then. As he did not see him after that date he could not say what his condition was at the date of the execution of the deed.
Dr. Mayne found George Gregg suffering from the result of the stroke and widespread arteriosclerotic disease; his mental capacity was impaired and his reasoning capacities to some extent affected. Dr. Mayne said that the progress of the disease from which he was suffering would as a rule be one of deterioration but there might be improvement. Another stroke would, as one would expect, make deterioration probable.
During the period from June to September certain events took place which throw considerable light on the circumstances leading up to the execution of the deed of the 28th September, 1953, and I wish to refer to certain portions of the evidence which I regard as relevant to the issues which I have to decide. It is apparent that some discussions with regard to the recompense of the Kidd family for looking after George Gregg went on early in June, 1953, between the Kidd family and Mr. Dawson Miller, George Gregg’s brother-in-law. These culminated in a visit by Dawson Miller and Jack Kidd to Mr. Jeffers, who had up to then acted as George Gregg’s solicitor, on the 15th June. The burden of what they had to say was that George Gregg was living with the Kidds and that some arrangement should be made for the transfer of George Gregg’s farm to Mrs. Kidd or one of her sons subject to the payment of £500 to Mark Gregg. It transpired, however, that George Gregg was then very ill and had not himself sent for Mr. Jeffers. In fact George Gregg had not, it appeared, mentioned settling his affairs and the whole idea of the purported transfer had apparently originated with Mr. Miller and the Kidd family. The suggestion was no doubt made because the Kidds had taken on themselves the onerous duty of looking after George Gregg and there is no doubt Mr. Miller supported the idea. Mr. Jeffers very properly said that unless George Gregg himself wished to see him he could not do anything. Since George Gregg was very ill Mr. Jeffers added that Dr. Seale would have to certify him fit for business before he would take his instructions. They left, saying that they would see Dr. Seale and get him to go out to see George Gregg.
On the 22nd June Mrs. Hannah Kidd herself called at Mr. Jeffers’ office. She told him that Dr. Seale had seen George and said he was incapable of doing business. She pointed out the work and cost involved in looking after her brother and asked what could be done about the matter. Mr. Jeffers’ view was that the moneys coming from the lettings of George’s farm should be utilised to meet the expenses. He offered to ask Chancellor Nelson, George Gregg’s rector, to approach George to see if he would be satisfied with the suggestion. Mr. Jeffers did not know the precise income of the farm, but considered it would be ample to recompense the Kidds.
Towards the end of June, 1953, Dr. Seale formed the view that George Gregg should be sent to Dublin for further treatment by Dr. Mayne. He engaged a room for him at a nursing home. Mrs. Miller called out to Bohermore on the 28th June to take him in her car to Dublin, but he was not removed on that occasion, and I am satisfied that this was mainly owing to Mrs. Kidd’s attitude.
On the 25th July Jack Kidd called on Mr. Jeffers and informed him that George Gregg wanted to see Mr. Dawson Miller and himself the following Monday, the 27th July for the purpose of making a will. Jack Kidd said that George Gregg was now recovered and was perfect. That was, to say the least of it, an overstatement as to George Gregg’s condition. It transpired during the interview that Mrs. Kidd had a short time before been to see the Reverend Mr. Willis, the rector of the parish in which she resided, to get him to approach George Gregg to make a will, but he had declined to interfere. Jack Kidd further said that Mrs. Kidd had also been to see Chancellor Nelson with the same object, that the Chancellor had called to see George, but that George Gregg would not discuss matters with him. He added that Dawson Miller had a week before told George Gregg that he should give the place to the Kidds. George Gregg was, he said, unwilling to adopt a suggestion that he should go to live with Edie Gregg, the plaintiff’s sister, and, when told that the plaintiff had been tidying up at Tinryland, said that he would have him thrown out on the road. George Gregg, he said, had told his mother that he wanted to make a will giving her and Mark Gregg some money.
As a result of the interview with Jack Kidd Mr. Jeffers repaired to Bohermore on the 27th July with Mr. Dawson Miller. What transpired at the interview is of importance and I should say that I accept what Mr. Jeffers said in his evidence as a correct account of what occurred on that occasion. From what George Gregg said to Mr. Jeffers it was obvious that Mrs. Kidd was anxious that George Gregg should make a will and that at that stage he was unwilling to do so. In fact he said that he was being rushed by his sister. Mr. Jeffers was anxious that George Gregg should state his attitude in the presence of Mr. Miller and Mrs. Kidd. George Gregg did not wish to see Mr. Miller but consented to see Mrs. Kidd. He told her that he could make no arrangements because he could not think clearly. An argument ensued in the course of which Mrs. Kidd stated that she could not keep him unless he made a will. She was insistent that he would have to make a will or get out. He stated that he wished to have his existing will destroyed but appeared at some stages not to recollect what was in it. He directed Mr. Jeffers to state what was in it in Mrs. Kidd’s presence, which he did. He was distressed and worried by this interview, fearing he would have to leave the house, which he did not wish to do. Mr. Jeffers explained to him that entirely apart from making a will he should make provision for his maintenance and for paying Mrs. Kidd for looking after him. He agreed to give her £50 out of the money in the auctioneers’ hands in respect of the grazing rents of his lands. Mr. Jeffers informed Mrs. Kidd of this but she refused the offer and insisted that a will should be made. On this being reported to George Gregg, he was again worried and felt he would have to leave. Before Mr. Jeffers left he saw Mrs. Kidd again, along with Mr. Miller, and both insisted to him that George Gregg would have to make a will or be put out. Mr. Miller added that he would not be able to stand being moved if he was put out. Mr. Miller and Mrs. Kidd then returned to George Gregg’s room, and, when they came out, Mr. Miller said that George had refused to make a will, and, from what they said to Mr. Jeffers, it was clear to him that they had made it clear to George Gregg that he must make a will or get out. Mr. Jeffers told them that a will made under undue influence would be invalid, but he says that no attention was paid to what he said, and he then left having pointed out that while Mrs. Kidd was quite justified in seeking some arrangement to be made for George’s maintenance, no one had the right to insist upon his making a will if he did not wish to do so. I have dealt in some detail with this interview because it indicates what the attitude and aims of Mrs. Kidd were at that early stage. Strong pressure was being put on George Gregg to make a will at a time when he was in poor condition to resist, and that pressure was backed by a threat which was bound to have a strong affect on George Gregg’s mind. I have no doubt that the will which Mrs. Kidd wished him to make was one in favour of some one or other of the members of the Kidd family.
Mrs. Kidd was not satisfied to allow things to remain as they were. Dr. Gavin, who had not attended George Gregg before, was summoned to visit him. He saw him on the 31st July and again on the 3rd and 11th August. On the 31st July he found George suffering from residual haemoplegia. His blood pressure was raised; his left arm was not as strong as his right; his hearing was affected but that was put right. He explained his condition, but things would have to be dragged out of him, as the doctor put it. On the 3rd August he was satisfied that he was capable of looking after his affairs; but he had not known George Gregg when he was in good health and admitted that his opinion would have been affected if he had known of George Gregg’s previously cheerful and voluble disposition. He was then quiet and difficult to get answers from and required to have things explained slowly to him.
Having again received information, this time from the Reverend Mr. Willis, to the effect that George Gregg wished to make a will, Mr. Jeffers again went to Bohermore on the 11th August. Mr. Willis had informed him that it was Jack Kidd who had asked him to phone and that he had said that Dr. Gavin had certified George Gregg fit to make a will. Mr. Jeffers brought Dr. Seale with him so that he could have the benefit of Dr. Seale’s views, as George Gregg’s medical attendant, as to his capacity to make a will. Dr. Seale formed the view that George Gregg was not competent to make a will. The doctor found that certain answers George Gregg gave to his questions were not correct and that his mental condition had deteriorated since June. He just answered, “yes” or “no,” to questions and made no effort to chat, which was quite different from his normal habits. He was clear intermittently, but not for long enough to know what he was doing. His view was that George Gregg could not understand or appreciate affairs of business and that he could not evaluate or resist suggestions made to him. The doctor thought he could be persuaded to do anything. He never saw George Gregg again nor was his assistance with regard to George Gregg’s medical history sought after that date by any other doctor. He did not on that occasion put any question to George Gregg about the extent of his property or about his family or generally about his making a will as he thought there was no use in doing so.
To Mr. Jeffers George Gregg also seemed to have deteriorated. Although normally cheerful and chatty, he had little to say. His answers were short, his speech was not very clear and he was inclined to ramble a little at times. He informed George Gregg that having regard to Dr. Seale’s view he could not make a will for him, but later asked him what he would do if he was able to make a will. He replied that he would give the place to his sister, Hannah, and her son, Jack Kidd. When he was asked whether he meant to give them the place jointly or one after the other he seemed incapable of understanding what Mr. Jeffers meant and mumbled something that Mr. Jeffers could not hear. He also said he would like to benefit Dick’s little girl. He said her name was Edie, but later said the name was Markey, the name he usually used to refer to the plaintiff. According to Mr. Jeffers he seemed very confused but made some remark about paying Mrs. Kidd for looking after him.
Mrs. Kidd asked Mr. Jeffers why he could not make a will having regard to the views of Dr. Mansfield, who had also seen George Gregg prior to that date. Mr. Jeffers replied that Dr. Seale had better knowledge of the case than Dr. Mansfield. Mrs. Kidd was again not satisfied. She went that same evening to see Dr. Gavin, and, as a result, he went out to see George Gregg. He was satisfied that George Gregg wanted to make some change in his affairs and was capable of making that change and of determining what he wanted to do. He admitted that he was slow in his answers and that he took no steps to test their accuracy. He might have lingered on for two or three years, he thought.
On the 12th August Mrs. Kidd again came to Mr. Jeffers’ office and asked him whether George’s will had been destroyed, a question Mr. Jeffers declined to answer. She stated that Dr. Gavin had been called in to see George Gregg on the previous night, after Dr. Seale and Mr. Jeffers had left, and had certified George Gregg fit to make a will and that George Gregg had said that Mr. Jeffers had let him down in not making a will for him. Mr. Jeffers pointed out that George Gregg could get another solicitor if he was not satisfied. He had no more dealings with the parties up to the time of George Gregg’s death.
On the 15th August Mrs. Kidd wrote a letter to her sister, Mrs. Miller. She states that she wrote that letter at the dictation of Chancellor Nelson, a suggestion that I do not believe. The letter reads:
“Dear Susan. I want you to get a bed ready for your brother George in Tinryland, or the only alternative a bed in the County Hospital. I have done all in my capacity for him. I cannot continue any longer. Please let me have a reply immediately.”
“Yours,” “H. M. Kidd.”
Ken Miller, Mrs. Miller’s son, was given this letter to take to Bohermore to read to his uncle. He did so. While Mrs. Miller’s action in sending the letter to her brother may be open to criticism, it is hardly to be suggested that Mrs. Kidd did not intend her attitude to be made known to him. The letter was, of course, a great shock to George Gregg.
Early in September Mrs. Kidd betook herself to consult Mr. Cody, a solicitor practising in Bagenalstown. She had several interviews with him. Her object, Mr. Cody understood, was to get something done about George’s affairs and to have her position as regards his maintenance secured. She gave him certain information about George Gregg, told him she was looking after him, that he had had a stroke and was possessed of the farm. She was Mr. Cody’s source of information as to the background. Mr. Cody did not keep a note of his attendances on Mrs. Kidd and does not remember what exactly passed between them, but he recalled that Mrs. Kidd had said that Mr. Jeffers had refused to make a will for George Gregg on the advice of Dr. Seale. Mr. Cody gave Mrs. Kidd certain advice. He anticipated litigation and suggested the advisability of having George Gregg examined by two doctors. Mr. Cody had not up to this time been sent for or consulted by George Gregg himself.
In accordance with Mr. Cody’s advice Dr. Mansfield and Dr. Humphries examined George Gregg on the 25th September. Dr. Humphries did not know him before and was about ten minutes with him. He asked him some questions about simple every-day affairs, which he answered apparently to the doctor’s satisfaction. Dr. Humphries came to the conclusion that he was capable of doing business and altering the settlement of his affairs by a procedure of question and answer. While his mental processes were somewhat impaired he thought he could make a simple will if matters were explained slowly to him. The doctor expressed the view that he did not think that George Gregg would be influenced by the views of others but it would seem to me that the doctor’s lack of knowledge of the background put him in a poor position to form any such view after so short an interview. He thought from what he saw that George Gregg might have lingered on for three or four years.
Dr. Mansfield had previously seen George Gregg on the 4th June. He was uncertain then whether he had had a second stroke or not, but he had just previously become worse and had little use of his arm and leg on the left side. When he saw him again on the 6th June he answered simple questions and was clear to that extent. He saw him later on the 6th July and on the 26th and 27th August but there was not much change in his condition. Mrs. Kidd it was who asked Dr. Mansfield to see George Gregg on the 25th September, the object being to see if he was fit to make a will. He asked him about his farm and whom he wished to leave it to; he said he wished to leave it to one of the Kidd family. His answers were satisfactory and the doctor came to the conclusion he could make a simple will but that he was not capable of making a complicated disposition of a lot of property; he was incapable of continuing a long process of thought or of concentration. As to his general observations of the patient, he agreed that any change would be towards deterioration. The disorder of haemoplegia, he agreed, affects the brain processes and there may be periods of clarity followed by periods of confusion. He also thought that he might have lingered on a few years.
William Kidd having informed Mr. Cody that George Gregg wished to settle his affairs and wanted him to go out, Mr. Cody went to Bohermore on the 26th September and saw the deceased. He spent from half an hour to three-quarters of an hour with him. He said that George Gregg looked all right to him and that he could see nothing wrong with him. He was able to talk to Mr. Cody who said that he understood he wished to settle his affairs. Mr. Cody spoke to him of his previous will and its contents and about his farm. George Gregg answered such questions as he was asked satisfactorily but was slow to answer and generally confined his answer to the one word, “yes.” George Gregg said that he wanted to leave the farm at Tinryland to Jack Kidd by deed. Mr. Cody explained to George Gregg the two ways in which he could dispose of his property, by will or by deed. He pointed out the salient differences between a deed and a will and in particular that a will can be changed but that a deed cannot be altered. Mr. Cody was satisfied that George Gregg understood what he was told. Before leaving the house Mr. Cody told the Kidds of the instructions he had received and asked William Kidd if he would act as trustee, which he agreed to do.
On the 28th September Mr. Cody returned with the engrossment of a deed which he had prepared in the meantime. By it the farm was transferred to William Gregg Kidd upon trust for George Gregg for life and in remainder to the use of John George Kidd in fee simple. The deed was read over to George Gregg. Mr. Cody explained its effect and asked George Gregg if he understood it. George Gregg said that he did and executed it, after which Mr. Cody departed.
Mr. Cody says that George Gregg was on that occasion as clear as on the previous day he saw him and as far as he could judge understood what he was saying to him and knew what he was doing. He had not had the benefit of the views of the doctors who had examined George Gregg just before. He relied on what he saw himself. He did not realise that George Gregg was permanently paralysed, nor did he consider how long he might possibly live. He said that he did not consider what position George Gregg would be in if he changed his mind. He did not at the time of taking instructions or drawing the deed know that pressure was being brought to bear on George Gregg; he only discovered that when the affidavit of discovery was filed by the plaintiffs, when presumably he had the advantage of reading Mr. Jeffers’ notes of his attendances on the parties. He was in no way on guard against the possibility that the Kidds might be influencing George Gregg nor did he apparently appreciate that George Gregg was in a position in which he would require protection. He did not give George Gregg any advice as to the possibility or desirability of inserting in the deed a clause of revocation or any provision that would provide for him being permitted to reside at Bohermore or binding the Kidds to care for him for the rest of his life, nor did he consider the desirability of making any provision compelling Jack Kidd to work the lands during his life. In short, he did not give any serious consideration to the possibility that the Kidds might fall out with George Gregg after the deed was executed nor what would happen to George Gregg if they did. He got a payment on account of the costs relative to drawing the deed from Jack Kidd and intended to furnish the bill of costs to Jack Kidd later on.
Voluntary gifts, made inter vivos, obtained by persons standing in a confidential, fiduciary, or other relation to the donor in which dominion may be exercised over him may, upon principles of general public policy, be set aside where there has bees some improper conduct, overreaching or coercion exercised against the donor. The general principles are well stated in White and Tudor’s Leading Cases in Equity in the notes appended to the case of Hugueninv. Baseley (1). As Lord Cottenham states in Dent v. Bennett (2): “The relief . . . stands upon a general principle, applying to all variety of relations in which dominion may be exercised by one person over another.” It applies of course where the gift is the result of influence expressly used by the donee and also “where the relations between the donor and donee have at or shortly before the execution of the gift been such as to raise a presumption that the donee had influence over the donor. In such a case the Court sets aside a voluntary gift, unless it is proved that in fact the gift was the spontaneous act of the donor acting under circumstances which enabled him to exercise an independent will and which justifies the Court in holding that the gift was the result of a free exercise of the donor’s will”: per Cotton L. J. in Allcard v. Skinner (3).
The courts have never confined the application of the principle to any stated forms of relationship. To do so would fetter that wide jurisdiction to relieve against all manner of constructive fraud which courts administering equitable principles have always exercised. The principle has been exercised in the case of an improvident voluntary settlement by a younger sister in favour of an elder sister, who had obtained great ascendancy and influence over the younger sister, the younger sister not having the benefit of independent advice: Harvey v. Mount (4). In Sharpv. Leach (5) a voluntary deed, under which a brother obtained an advantage from a sister who lived with him and consulted him about her affairs, was set aside. The improvidence of the transaction was held to cast the onus on the defendant to show that the deed emanated from the free will of the sister after it had been explained to her. Similarly in Griffiths v. Robins (6), an old lady, nearly blind, who reserving only a life estate to herself, made a deed of gift of all her property to her niece and her husband, on whose kindness and assistance she depended, was held entitled to have the deed set aside. The onus was held to be upon the recipients to establish that the deed was made of her own free will and effected through the intervention of some indifferent person.
The authorities cited leave no doubt that the principle can be extended to the relationship of brother and sister, where a sister has for one reason or another acquired an influence or dominion over a brother and uses that influence improperly for her own ends. Likewise it can be extended in similar circumstances to the relationship between uncle and nephew. The influence may arise or be acquired in many ways, such as through disparity of age or the mental or physical incapacity of the donor or, indeed, out of a mere dependence upon the kindness and assistance of another. To bring the principle into play it must be shown that the opportunity for the exercise of the influence or ascendancy on the donor existed, as where the parties reside together or meet frequently. While close family relationship creates a situation where influence is readily acquired, mere blood relationship is not sufficient of itself to call the principle into play; it must be shown that the actual relations between the parties give rise to a presumption of influence.
Although the exercise of undue influence is pleaded against the donee of the deed impugned, as well as against others, it is true to say that the evidence was mainly directed to establishing that influence had been obtained and exercised over the donor by Mrs. Hannah Kidds mother of the donee. There is in my mind no doubt that if it be shown that this deed was obtained by the undue influence of Mrs. Hannah Kidd or as a result of her dominion of mind over her brother, improperly exercised to benefit a member of her family, this deed cannot stand. Indeed, it is only right to say that a contention to the contrary was never made by the advisers of the defendants. Although authority is scarcely required on the point, I recall the words of Lord Eldon in the first paragraph of his judgment in Huegenin, v. Baseley (1) where he says:”I should regret that any doubt could be entertained, whether it is not competent to a Court of equity to take away from third persons the benefits which they have derived from the fraud, imposition, or undue influence of others.” If the proper deductions from the evidence adduced are that Jack Kidd knew perfectly well that his mother had acquired influence over the donor and that they acted together in order to obtain some advantage from the donor, the grounds for interfering are all the stronger.
Some debate took place during the hearing as to where the onus of proof lay. In the case of a voluntary gift where the relations between the donor and donee are such as to raise a presumption that the donee had influence over the donor, the onus lies, in my view, on the donee to establish that the gift was the spontaneous act of the donor acting in circumstances which enabled him to exercise an independent will and that the gift was the result of a free exercise of the donor’s will. This proposition I believe to be one well established. Authority will be found for it in the cases of Allcard v. Skinner (1), Sharp v. Leach (2),and Griffiths v. Robins (3), already referred to, and also in the observations of Lord Romilly in Cooke v. Lamotte (4).If more modern authority is required it will be found in the judgment of Lord Hailsham in the comparatively recent case of Inche Noriah v. Shaik Allie Bin Omar (5).Where the relations between the donor and another person raise a presumption that that other person had influence over the donor and the evidence shows that that third party is both closely related to the donee and was closely associated in action and interest with the donee at the time of the events leading to the transaction, it would seem to me on principle that the onus in such circumstances must be likewise thrown on the donee to establish that the gift resulted from the free exercise of the donor’s will.
The presumption may, of course, be rebutted either by showing that the donor has had competent independent advice and acted of his own free will or in some other way. As Lord Hailsham says, in Inche Noriah v. Shaik Allie Bin Omar (6):”The most obvious way to prove” that the gift was the result of the free exercise of independent will is to establish “that the gift was made after the nature and effect of the transaction had been fully explained to the donor by some independent and qualified person so completely as to satisfy the Court that the donor was acting independently of any influence from the donee and with full appreciation of what he was doing.” If that method of rebutting the presumption is adopted, and it is not the only method open, the advice relied on must, in the words of Lord Hailsham, “be given with a knowledge of all relevant circumstances and must be such as a competent and honest adviser would give if acting solely in the interests of the donor.” The nature of that advice naturally must vary with the circumstances of each particular case.
Although there is considerable difference of medical opinion as to George Gregg’s mental and physical condition at the time when the deed was executed and during the period immediately preceding that event, I have formed
these conclusions as to his health during the relevant period: he had had at least one stroke and two serious relapses; he was partially paralysed and virtually bedridden; he suffered from a condition the usual progress of which is one of deterioration; during the summer and autumn his reasoning faculties became impaired; at times his memory was intermittent and faulty and I believe that he could not concentrate for any appreciable length of time; he had periods of confusion of mind. In character he had formerly been voluble and cheerful but had changed to saying little and had become difficult to get answers from. I believe that his capacity to make rational decisions was by the autumn, definitely impaired and that his capacity to resist influence and suggestions was very slight and easily overcome. At times, I think, he might have been fit to make a simple officious will or simple disposition of his property if uninfluenced and properly advised, but it would, in my view, have been difficult to discover just when he was in that condition and equally difficult to bring him to a full understanding of the transaction. Someone well acquainted with him would obviously be the best person to make the attempt, but even such a person would require to exercise care and patience in examining him before coming to a conclusion as to his capacity. Even if he could be shown to have had the capacity to bring a reasoning mind to bear on such a disposition there would still remain the formidable difficulty of ascertaining and ensuring that his mind was emancipated from the influence and dominion of others alleged to have existed.
The last above-mentioned matter brings me to a consideration of the relations between the donor, on the one hand, and the donee and his mother, Mrs. Hannah Kidd, on the other hand, at and immediately before the execution of the deed. As far back as the end of May, 1953, George Gregg had been moved to the Kidds’ house and he had remained with them until his death. During most of that time he was a very sick man, only a wreck of his former self. He was during that period entirely dependent on the Kidd family for all the attention his helpless condition required. If and when he was fit for company and conversation it would naturally be members of that family whom he would generally see and he does not seem to have seen much of other members of his family from June onwards. I believe that he knew with more or less clarity, according to the varying state of his health, that he was then dependent on the Kidd family and that he was at times at least most apprehensive as to what would become of him were they to refuse to look after him any longer. In short, his circumstances and condition laid him open in a high degree to the influence of that family, more particularly to that of Mrs. Hannah Kidd, having regard to her relationship to him and her position in the household. Mrs. Kidd’s character as revealed by her evidence and demeanour is not, in this connection, by any means irrelevant to what I am dealing with, and I should say that she struck me as a woman of forceful and determined character, who believed in having her own way without much regard to the views or advice of others.
Apart from these circumstances which I have mentioned, there is a considerable body of evidence as to the actual relations existing between George Gregg and his relatives, the Kidds, and of their attitude to him, to which I must briefly refer. Before doing so I should say that it must, in all fairness, be recognised that the Kidds acted with kindness in taking George Gregg into their house, having regard to his condition, and I see no reason to doubt that they treated him kindly and looked after him to the best of their ability. No one would suggest that it would have been unreasonable for Mrs. Kidd to seek reasonable recompense for the onerous services she performed. Unfortunately, I regret to say that the evidence does not lead me to believe that the Kidds’ motives were by any means solely altruistic and moreover I was forced to take an unfavourable view of the veracity of such members of the family as gave evidence before me in respect of a good deal of what they told me.
The evidence leads me to believe that from an early stage Mrs. Kidd formed the view, shared by her son, Jack Kidd, that George Gregg’s farm at Tinryland should go to the Kidds in return for looking after him. It does not matter, to my mind, whether the idea originated with Dawson Miller or Mrs. Kidd herself or her son. The attempts to get George Gregg to make some further settlement of his affairs, other than that provided for in his existing will, indicated by the approaches of Mrs. Kidd and Jack Kidd to Mr. Jeffers and of Mrs. Kidd to Mr. Cody, all indicate their frame of mind. Likewise, the fact that they kept stressing that doctors other than Dr. Seale thought George Gregg fit to transact business betrayed their anxiety to have something done and I am satisfied that what was aimed at was the making of some disposition of George Gregg’s property in favour of Mrs. Kidd or some of her family and not merely obtaining some reasonable recompense for her services.
That Mrs. Kidd realised that she was in a position to influence her brother and was prepared to put pressure upon him is revealed strikingly on several occasions. Dr. Seale’s view was that George Gregg should go to Dublin for further examination and treatment by Dr. Mayne towards the end of June. He did not go and the real reason is to be found in Mrs. Kidd’s attitude. Having regard to all the circumstances, especially the burden he must have been to her, it is difficult to avoid drawing the inference that she wished to keep him in her house for purposes of her own not difficult to seek. She showed her hand clearly on the 27th July when she insisted that George Gregg should make a will, although he was unwilling to do so, and brought what must be regarded as strong pressure to bear on him to do so, having regard to his condition, by threatening to put him out if he did not do so. At the same time she rejected the suggestion that a money payment might be arranged for and insisted on a will being made, and there can be little doubt that it was one benefitting the Kidds that she had in view. That she was of the same mind in August and still prepared to exercise pressure is shown by the terms of her letter of the 15th August indicating that George would have to go to Tinryland or the County Hospital. She must have known that her attitude as revealed in this letter would be made known to George Gregg and would profoundly affect him. In September she made several visits to Mr. Cody, who was not George Gregg’s solicitor, and I believe that her object again was to see if she could get something done, through the intervention of Mr. Cody, which would achieve her objects. Mr. Miller in the beginning, I believe, supported her, but he only plays a secondary role.
Although he plays a lesser part than his mother the evidence establishes also that the defendant, John George Kidd, was a party to his mother’s activities and took an active part in the endeavours made to get George Gregg to make a fresh disposition of his property in a fashion favourable to the Kidd family. He was party, along with Mr. Dawson Miller, to the original suggestion made in Mr. Jeffers’ office on the 15th June that arrangements should be made to have the farm at Tinryland transferred to Mrs. Kidd or one of the family, an idea that originated with them and not with George Gregg, who had at that stage not even mentioned settling his affairs. It was Jack Kidd again who went to Mr. Jeffers on the 25th July to get him to go out to make a will for George Gregg. He did not scruple on that occasion to make what I regard as an untrue statement as to George Gregg’s health with the object, I am satisfied, of allaying Mr. Jeffers’ anxieties as to George Gregg’s capacity. Indeed, that was not the only occasion on which he saw fit to suggest that George Gregg’s health was better than it was so as to induce Mr. Jeffers to go out and make a will for him. He knew all about his mother’s efforts to get the clergy to intervene to get George Gregg to make a will, but saw fit to deny that he had told Mr. Jeffers of these approaches by his mother. His testimony was so uncandid as to lead me to the belief that he was involved even more than the direct evidence indicates. The evidence satisfies me that Jack Kidd was of one mind with his mother. He was, I believe, perfectly aware of his mother’s influence over his uncle and perfectly willing to accept the benefit of its exercise on his behalf.
The facts as proved are such as to lead me to the conclusion not only that the relations between George Gregg and his sister were such as to raise a presumption that she had influence over him, but that she was exercising that influence towards securing his farm for some one or other of her family. She was certainly using active pressure on the 27th July, 1953, and her subsequent activities lead me to believe that that pressure was not relaxed to the date on which the deed was executed; that influence was such, having regard to George Gregg’s incapacity and circumstances, as to preclude the exercise by him of a free and independent judgment. The facts are sufficient to support a finding of the actual exercise of undue influence, but it is sufficient to say that the relations between the donor, on the one hand, and his sister and nephew, on the other, were such as to raise a presumption that the donee’s mother had influence over the donor. I am satisfied that the donee was aware of this influence and acted in combination with his mother; the onus consequently lies on the defendants to establish that the gift resulted from the free exercise of the donor’s will acting in circumstances which enabled him to exercise an independent will.
Before passing to a consideration of the evidence of Mr. Cody, relied upon by the defendants to show that the deed was the free act of the settlor acting in circumstances which enabled him to exercise an independent will, I wish to say something about the deed itself, since its form and contents may, apart from the other circumstances of the case, afford some evidence that the donor did not understand the transaction and so of undue influence. After reserving a life estate to the donor, the effect of the deed is to transfer an estate in remainder to the donee of practically all the donor’s property, since apart from the farm he only possessed chattel property of small value. It contains no covenants or other safeguards to ensure that George Gregg would be looked after for the rest of his life by the Kidds or to secure that his farm would be worked during his lifetime. The medical evidence satisfies me that George Gregg might well have lingered on for a matter of years and, while I do not suggest that they would have done so, there was nothing to prevent the Kidds from putting him out of their house after he had executed the deed, in which event he would only have the value of his life estate as a bargaining factor to secure his future comfort. This deed was therefore on the face of it improvident, a fact affording at least some indication militating against the contention that it was the spontaneous product of an independent mind.
Another factor of weight in connection with the form of the deed is that it contains no power of revocation, a fact not brought to the attention of the donor. I accept the view contended for by the defendants that the absence of a power of revocation in a voluntary deed is not of itself a sufficient ground for the cancelling of the deed. It is, as Turner L. J. states in Toher v. Toher (1), approved by James L. J. in Hall v. Hall (2), a circumstance to be taken into consideration and it is a circumstance of more or less weight according to the facts of each particular case. It is, I apprehend, a material factor where the deed is improvident unless the donor is protected by such a power. FitzGibbon L. J. in Horan v. MacMahon (3) stated at p. 654 his view, frequently quoted, that to get over the absence of the clause in a voluntary deed the “other circumstances must show . . . that it is the free act of a settlor who knows what he is doing; and, 2, either that it is a deed provident and just in itself, or that any apparent improvidence and injustice is in accordance with the actual intention of the settlor.” I shall have to revert to these considerations after considering the effect of Mr. Cody’s evidence.
The duty of a solicitor advising a donor suffering from a degree of mental or physical infirmity about to make a voluntary settlement of the greater portion of his property is not an easy one. The judgment of Farwell J. in Powellv. Powell (4) has been relied on as stating the duty. Having stated that in his view a solicitor who acts for both parties cannot be independent of the donee in fact and that it is not sufficient that the donor should have an independent adviser unless he acts on the advice, Farwell J. points out that it is the duty of the solicitor to protect the donor against himself and not merely against the personal influence of the donee. He was dealing with a case of child and step-parent but the same considerations apply, in my view, to a case such as the present. He goes on to say that the solicitor does not discharge his duty by satisfying himself simply that the donor understands and wishes to carry out the particular transaction, and adds (at p. 247):”He must also satisfy himself that the gift is one that it is right and proper for the donor to make under all the circumstances; and if he is not so satisfied, his duty is to advise his client not to go on with the transaction, and to refuse to act. further for him if he persists.” He found that the solicitor in question had not, inter alia, advised the donor in that case of the proper course to adopt or recommended the insertion in the settlement of a power of revocation. The Privy Council in Inche Noriah v. Shaik Allie Bin Omar (1) were not prepared to affirm that independent legal advice, when given, does not rebut the presumption unless it be shown that the advice was taken. What is necessary, Lord Hailsham said, is that the donee should prove that the gift was the result of the free exercise of independent will. He adds that the most obvious way to prove this is by establishing that the gift was made after the nature and effect of the transaction had been fully explained to the donor by some independent and qualified person so completely as to satisfy the Court that the donor was acting independently of any influence from the donee and with the full appreciation of what he was doing. Finally, he says, the advice must be given with a knowledge of all relevant circumstances and must be such as a competent adviser would give if acting solely in the interests of the donor. With great respect to that learned Judge there are two statements in his judgment on which I venture to differ from the views of Farwell J. In accordance with the view of the Privy Council it seems to me that independent legal advice may in certain circumstances rebut the presumption even though that advice is not taken. Moreover, I do not think that a solicitor is bound to refuse to act further for his client in all cases of the nature I am dealing with where his advice to his client not to proceed with the transaction is not taken, though in some extreme cases that may be the proper course. Apart from these two matters I adopt the views of Farwell J. and Lord Hailsham as to the duties of a solicitor in similar cases, observing, however, that they are not necessarily exhaustive. The nature of the advice to be given must in all instances depend upon the facts and circumstances of each case.
These views of a general nature as to the duties of a solicitor in cases of this kind have now to be applied in a practical fashion to the particular circumstances of this case and, without purporting to deal with every detail, I conceive that a solicitor advising one in the circumstances of George Gregg is at least under the following obligations to his client. To begin with, he should apprise himself of the surrounding circumstances in so far as he reasonably can; if he does not do this he can never put himself in a position to advise his client fully and effectively. He would need to discover the nature of the donor’s illness so as to be able to estimate in some reasonable degree the nature of his incapacity. He would need to know how far his reasoning capacity was affected and how far he was capable of comprehending the manner in which the proposed transaction would affect his own interests and his future and to what extent he was competent to come to a rational decision. Without knowing all that, he could not be said to have sufficient knowledge of his client to enable him to judge the nature of the advice he should give him and the degree of protection he would require. With the knowledge that he would have gained upon inquiry that the donor was incapacitated to some degree both mentally and physically and had been living for some time with the family of the proposed transferee, by one of whom the solicitor in this case had originally been consulted with a view to having something done about the donor’s affairs, he ought then to have been put on his guard and he should, in my view, then endeavour to discover whether his client was subject to the influence of the donee or any member of his family and, if so, the extent of that influence. Having discovered the extent of the donor’s incapacity he should make sure that he was capable of fully understanding the nature and results of a transaction such as that proposed. Without that capacity the transaction could not be proceeded with, but, assuming that the solicitor satisfies himself that it exists, he should then make sure that his client did thoroughly understand what he was doing and how it would affect him. He would need in this connection to consider very carefully whether the transaction was one for his benefit and, as I see it, this was a case that called for positive and definite advice, not mere explanation. The suggested transfer was, on the face of it, an improvident transaction. The plight of the donor demanded that he should be protected against himself. He should have been told clearly that the transaction was improvident, that it secured nothing for him in return for what he was giving, and that he was not only depriving himself of most of what he possessed, but also the means of securing his future comfort. He should have been advised against entering into the proposed transaction unless he was adequately and properly safeguarded. In particular, he should have been told that he might safeguard himself to a great degree by having a power of revocation inserted in the instrument. Before he could conscientiously advise his client to proceed with the transaction the solicitor would also need to satisfy himself that his intervention and advice had emancipated the donor from any adverse influence he lay under and that he was acting of his own free will.
Mr. Cody was faced with an unenviable task of difficulty and delicacy when he was called upon to attend George Gregg in September, 1953. It is easy to be wise after the event and I feel sure that Mr. Cody would have acted differently had he appreciated what the real circumstances were. It may well be that he was to some extent misled and it is right to say that he was quite candid about the advice he gave. I must, however, consider whether such advice as he did give could have the results contended for by the defendants. While I am alive to the fact that it was Mrs. Kidd, and not the donee, who had previously consulted him I have the gravest doubts whether Mr. Cody could be properly described as an independent solicitor; but even assuming for the moment that he was, Mr. Cody did not, I fear, appreciate the full extent of George Gregg’s physical and mental incapacity. He had not known his client previously and was not in a position to judge how much he had deteriorated and I believe he did not appreciate the extent to which his reasoning power and ability to make rational decisions was affected. He did not sufficiently consider what effect the transaction would have on George Gregg’s future nor what would happen should he fall out with the Kidds, nor did he consider in what way George Gregg might be safeguarded, nor did he, I believe, appreciate the entire improvidence of the transaction. It follows that he did not feel called upon to give, nor did he give, George Gregg any positive advice in the way of dissuading him from entering into the transaction as proposed nor did he advise George Gregg as to the various ways in which he might be safeguarded from the improvidence he contemplated nor urge him to adopt any suggestions calculated to safeguard him. In particular, he never brought to his notice the possibility of inserting a power of revocation in the deed nor did he urge on him the desirability of such a course, which I believe the circumstances called for. Furthermore, Mr. Cody did not appreciate the true nature of the relations existing between the donor and Mrs. Kidd and the donor and the donee, to a lesser degree. Deprived of that knowledge, he was never in a position to consider what advice and warning he should properly give to the donor and what steps he should take to make sure that the settlor was acting with a free and independent mind and was emancipated from the influence of his sister. As a result, no steps were taken to ensure that George Gregg acted independently and freed from the effects of his sister’s influence. The advice received by the donor was not therefore sufficient to enable the donor to understand fully and properly the nature of the entire transaction nor such as to protect the donor against himself; nor was it sufficient to rebut the presumption, nor does it satisfy me that the gift was the spontaneous act of a donor who knew what he was doing.
The findings I have so far made are sufficient to determine the action, but the plaintiff does not rest his case solely on the contentions I have dealt with. He also relies on the decision in Grealish v. Murphy (1), a decision of Gavan Duffy J., as he then was, and says that the circumstances of this case cause it to fall within the principle of that decision.
The plaintiff in that proceeding, who was mentally deficient, executed a deed transferring his farm to a much younger man. The deed reserved a life estate to the plaintiff but the lands were charged with the defendant’s right of residence and maintenance during the plaintiff’s life. The defendant covenanted to reside on, and to work and manage, the farm without reward during the plaintiff’s lifetime, to account for moneys received and expended and to pay the plaintiff £1 for every week in which he failed to reside on the farm and to indemnify the plaintiff for any loss or expense incurred or the maintenance or wages of any person employed to do work which the defendant failed to do. I have only taken the salient factors of the deed. They show that the plaintiff was more adequately protected than was George Gregg. Gavan Duffy J. took the view that the circumstances of the case brought into operation the principle stated by Lord Hatherley, in O’Rorke v.Bolingbroke (2) (in which he dissented on facts), that equity comes to the rescue whenever the parties to a contract have not met upon equal terms, the corollary being, he said, that the Court must inquire whether a grantor, shown to be unequal to protecting himself, has had the protection which was his due by reason of his infirmity. Having stated that the principle applies to improvident grants and that in several instances the inadequacy of the explanations given to the grantor has been a decisive factor in the Court’s action against an improvident deed, the learned Judge set aside the improvident deed by reason of the plaintiff’s weakness of mind coupled with the deficiencies of the legal advice under which he acted and his unawareness.
The late President expressly stated that the deed could not be avoided by reason of any undue influence and that the case was not one where any presumption of undue influence arose from the relationship of the parties. The degree of the plaintiff’s incapacity coupled with deficiencies of advice and the improvidence of the transaction was held sufficient in the circumstances of that case to entitle the donor to relief. That degree of incapacity was that the donor had not attained the normal power of an adult. I have already expressed the view that the deed made by George Gregg was improvident. He was suffering from such incapacity as would prevent him from understanding anything but the simplest transaction. His solicitor had not got the facts as to the nature of his illness or his incapacity. Apart from any question of the donor being subject to influence, he did not consider what safeguards might be necessary to protect George Gregg for the future nor warn him as to the improvidence of what he contemplated and against entering into the transaction as proposed. He did not advise him as to what steps he ought to take to protect himself, such as the insertion of a power of revocation. Since he was not warned of the improvidence of the transaction nor told what steps could be taken to safeguard himself, George Gregg was never fully aware of what he was doing or its consequences and could not, in my view, be said to have fully understood the transaction. The case therefore in some of its essential features falls within the principle of the decision of Gavan Duffy J. in Grealish v. Murphy (1), but as, in my view, the case falls more properly within the principles laid down in the other cases I have dealt with, I prefer to rest my judgment on the basis that the relations existing between the donor, on the one hand, and the donee and his mother, on the other, were such as to raise a presumption that the donee’s mother and the donee acting through and with her had influence over the donor and that that presumption has not been rebutted by showing that in fact the gift was the spontaneous act of the donor acting under circumstances which enabled him to exercise an independent will and that the gift resulted from a free exercise of the donor’s will.
The indenture of the 28th September, 1953, must, therefore, be set aside and the deed must be delivered up to be cancelled.
Bank of Ireland v. Smyth
[1995] IESC 3; [1995] 2 IR 459; [1996] 2 ILRM 241 (15th November, 1995)
Hamilton C.J.
I have read the judgment about to be delivered by Blayney J. and I agree with it.
Egan J.
I too agree with the judgment of Blayney J.
Blayney J.
1. The first defendant, Michael Joseph Smyth, is a farmer and is the owner of the lands comprised in Folio 9173F of the Register of Freeholders, County of Tipperary, which are situate at Lelagh, Rathcabbin, Roscrea. There are approximately 124 acres in the folio and the defendants’ family home is situate on part of the lands comprised in the folio.
On the 25th May, 1978, the first defendant “Mr. Smyth” executed an indenture of charge in favour of the Governor and Company of the Bank of Ireland “the bank” to secure all monies then owing or which should thereafter become owing on a general balance of account or otherwise from Mr. Smyth to the bank. The second defendant “Mrs. Smyth” signed a form of consent endorsed on the said charge whereby she consented for the purpose of s. 3 of the Family Home Protection Act, 1976, to the said charge. The said consent was in the following form:-
“I, Una Smyth of Lelagh, Rathcabbin, Roscrea, being the spouse
of Michael Smyth hereby consent for the purpose of s. 3 of the Family Home Protection Act, 1976, to the within mortgage to be created by the said Michael Smyth in favour of the Governor and Company of the Bank of Ireland for all liabilities, present and future, either solely or jointly whether as principal or surety with another or others and hereby consent to the registration in (sic.) the mortgage.
Dated the 25th day of May 1978.
Signed by the said Una Smyth.”
2. In June, 1988, there was a sum of £180,289.38 due and owing by Mr. Smyth to the bank on foot of the charge dated the 25th May, 1978. The bank thereupon issued a special summons pursuant to s. 62, sub-s. 7 of the Registration of Title Act, 1964, seeking an order for possession of the lands described in the said Folio 9173F of the Register of Freeholders County of Tipperary.
3. The summons was heard by Geoghegan J. on oral evidence on the 5th and 9th March, 1993, and in a reserved judgment dated the 26th March, 1993, the learned trial judge decided that the bank was not entitled to an order for possession of Mr. Smith’s lands and dismissed the claim of the bank. The bank now appeals against that dismiss.
4. A number of issues were raised in the High Court but the sole issue with which this Court is concerned is the single issue on which the learned trial judge decided in favour of the defendants. He held that “while there was a document purporting to be a consent in writing, there was in fact no consent within the meaning of the Act of 1976.”
5. The circumstances in which Mrs. Smyth came to give her consent to the transaction were not in dispute and might be summarised as follows. On the 12th May, 1978, Mr. Dowley wrote to Mr. Smyth as follows in connection with the proposed charge:-
“Dear Mr. Smyth
Further to recent correspondence I have now received from the bank’s law department the necessary legal papers for benefit of your signature.
Mrs. Smith’s signature will also be required and I shall be obliged if both of you will call on me as soon as convenient in order that we may complete the matter in hand.
Yours sincerely D.E. Dowley
Manager.”
6. In pursuance of this request, Mr. and Mrs. Smyth called to the bank on the 24th May. In the course of an interview with Mr. Dowley, which lasted between ten and fifteen minutes, Mrs. Smyth signed the form of consent. Mr. Dowley did not explain to Mrs. Smyth that she would lose her home if the payments were not made. And he did not suggest to her that she should get independent advice. The learned trial judge accepted that Mr. Dowley explained to Mrs. Smyth that she was signing a mortgage on her family home. However, it was accepted by counsel for the bank in the course of his submissions to this Court that Mrs. Smyth in fact believed that the charge did not affect the family home. Their house bad been built with a loan of £8,000 from the A.C.C., and there was a mortgage on the farm to secure this sum, and Mrs. Smyth believed that because of this the bank would be unable to sell or take possession of the family home. Counsel for the bank referred to this as being a unilateral mistake on the part of Mrs. Smyth and submitted that it did not affect the validity of her consent as Mr. Dowley, and accordingly the bank, could not reasonably have been expected to be aware of what was in her mind.
7. The main case made by the bank was that they had no duty at common law or in equity, or under the provisions of the Family Home Protection Act, 1976, to explain to Mrs. Smyth the nature of the charge to which she was giving her consent or the effect or consequences it could have to her.
8. Accordingly, as there had been no breach of duty on the part of the bank, it was entitled to rely on the consent signed by Mrs. Smyth even though there had been a unilateral mistake on her part in regard to the nature of the charge she was signing.
9. On behalf of Mrs. Smyth it was submitted that before her consent could be a valid consent under the Act of 1976 it had to be established that she fully and freely consented to what she was doing. As the bank had failed to establish this, it could not rely on the consent.
10. The net issue in the case is, accordingly, whether the consent signed by Mrs. Smyth was a sufficient consent for the purposes of the Act of 1976 having regard to the circumstances in which her consent was given and, in particular, having regard to her understanding of what she was doing. It was common case that, as required by the Act of 1976, she had signed the consent before her husband executed the charge, and accordingly this was not an issue in the case. The onus of proving that it was a sufficient consent is in my opinion on the bank. It is relying on the charge as giving it title to recover possession of Mr. Smyth’ s farm and, accordingly, the validity of the charge is an essential proof in the case and this depends on Mrs. Smyth having given a valid consent to the charge. In the absence of such a consent s. 3, sub-s. 1 of the Act of 1976 makes the charge void. That subsection provides as follows:-
“3. – (1) Where a spouse, without the prior consent in writing of the other spouse, purports to convey any interest in the family home to any person except the other spouse, then, subject to subsection (2) and (3) and section 4, the purported conveyance shall be void.”
11. It is common case that sub-ss. 2 and 3 and s. 4, to which the provisions of sub-s. 1 are subject, do not affect the position here, and accordingly do not have to be considered. The Court is concerned solely with whether there was a valid “prior consent in writing” given by Mrs. Smyth. It is clear from the definitions in s. 1 of the Act that a charge is a conveyance within s. 3, sub-section 1.
12. The question of what the requirements are which a consent has to comply with in order to be valid has not as yet been considered by any court. It seems to me that they have to be deduced from the object of the Act itself and from dicta of this Court explaining it, and also from authorities setting out what requirements have been laid down for consents which are required in other contexts.
13. The long title of the Act is:-
“An Act to provide for the protection of the Family Home and for related matters.”
14. The aim thus clearly set out requires no explanation and it is plain that the section which essentially gives effect to it is section 3. It follows that the purpose of the provision in s. 3 is to enable a spouse to protect the family home for her own benefit and also for that of her children. This is set out in very clear language by Henchy J. in his judgment in Hamilton v. Hamilton [1982] I.R. 466, where he said at p. 485 :-
“The Act of 1976 provides for the protection of the family home, presumably as an implementation of the constitutional duty that falls on the State to protect the family and to guard with special care the institution of marriage. To this end, the Act of 1976 (as I have pointed out) created a new right whereby (save in excepted cases) the non-disposing spouse is given a right to veto the disposition to a third party of any legal or equitable interest in the family home. But the Act goes further than giving just a power of veto. Even in cases where the non-disposing spouse does not profess to exercise the right to veto (because, for example, he or she does not know of such a right) or where such spouse is willing to refrain from exercising the right to veto and has expressed such willingness orally, nevertheless, if the prior consent in writing has not been given by the non-disposing spouse, the purported conveyance (save in the excepted cases) is rendered void by s. 3 of the Act of 1976. This, to my mind, shows that the legislature, in order to preserve inviolate the dual and interlocking rights of the spouses in the family home, intended the penalty of voidness to apply in order to prevent either a legal or an equitable interest in the family home being disposed of to a third party by the unilateral action of one of the spouses.”
15. This passage emphasises an important aspect of the right given to the spouse – it is given for the protection of the family, and not simply for the protection of the spouse. So in considering whether a valid consent has been given, this aspect must also be taken into account.
In Somers v. W. [1979] I.R. 94, Griffin J. also referred to s. 3 of the Act. The plaintiff there had purchased the family home of the defendant from the defendant’s husband. The couple were separated at the time of the sale and the conveyance had been executed without obtaining the defendant’s prior written consent. Griffin J. said in his judgment at p.113:-
“… the prohibition (i.e. in s. 3) covers every conceivable type of disposition of the family home by the defendant’s husband. If, therefore, the husband intends to sell the family home, or to raise a mortgage on the security of it, unless the exceptions in s. 3 apply, he cannot do so without first discussing the matter with the defendant and obtaining her prior consent in writing.”
16. This passage would seem to suggest that the responsibility for obtaining the consent is that of the other spouse after the matter had first been discussed between them.
17. There are two areas in which the requirements for a valid consent have been considered by the Court – marriage and adoption. In N v. K [1985] I.R. 733 four of the judges dealt with the nature of the consent required for a valid marriage. Finlay C.J. said at p. 742:-
“Consent to the taking of such a step [ i.e. valid marriage must, therefore, if the marriage is to be valid, be a fully free exercise of the independent will of the parties.
Whilst a court faced with the challenge to the validity of a marriage, based on an absence of real consent, should conduct its inquiry in accordance with defined legal concepts such as duress or, what has been described by O’Hanlon J., as ‘the related topic of undue influence’ (at p. 281) these concepts and the legal definition of them must remain subservient to the ultimate objective of ascertaining, in accordance with the onus of proof, whether the consent of the petitioning party was real or apparent.”
18. Griffin J. said at p. 751:-
“It is therefore of the utmost importance that the contract of marriage should be entered into with the full and free consent of the contracting parties, and if, as the Chief Justice has stated in his judgment, the apparent decision to marry on the part of one of the parties has been caused to such an extent by external pressure as to lose the character of a fully free act of that party’s will, no valid marriage has taken place.”
19. Hederman J. said in his judgment at p. 753:-
“A personal and full internal and informed consent is essential to a valid marriage.”
20. McCarthy J. at 754 refers to:-
“The need of a true voluntary consent, based upon adequate knowledge and freed from vitiating factors commonly described as undue influence or duress particularly those emanating from third parties.”
And at p. 755 of the report he stated:-
“The test – whether or not each party to the contract brought an informed and willing consent to it – in my view, is a subjective one, the burden of proving which lies upon the petitioner for a declaration of nullity.”
21. In the area of adoption, in G. v. An Bord Uchtála [1980] I.R. 32, Walsh J. said in his judgment at p. 74:-
“There is no definition in any of the Acts of the phrase ‘the placing of the child for adoption’. However, I think one may reasonably assume that it means either the handing over of the child for the purpose of its being adopted or even, if the mother retains the child, the giving of a clear and unambiguous indication that it is her desire to surrender her natural rights in respect of the child and that it be adopted. I am satisfied that, having regard to the natural rights of the mother, the proper construction of the provision in s. 3 of the Act of 1974 is that the consent, if given, must be such as to amount to a fully informed, free and willing surrender or an abandonment of these rights.”
22. The consequences of a consent given under s. 3 are not as far reaching as the consequences of a consent to marry or to place a child for adoption but one of the elements required for the validity of the consent in each of these cases is in my opinion applicable in the case of a consent under s. 3 also. This is the requirement that the consent must be an “informed consent”. Both Hederman J. and McCarthy J. used this particular term, and McCarthy J. also refers to “the need of a true voluntary consent based upon adequate knowledge.” And in G. v. An Bord Uchtála [1980] I.R. 32, Walsh J. says that the consent to place a child for adoption must be a fully informed consent.
23. In my opinion a consent under s. 3 must satisfy this requirement. It must be a fully informed consent. The spouse giving it must know what it is that he or she is consenting to. Since giving one’s consent means that one is approving of something, obviously a precondition is that one should have knowledge of what it is that one is approving.
24. In the instant case I am satisfied that Mrs. Smyth did not know what she was consenting to. She believed that the charge would affect the land only and would not affect the family home. She was not aware that the charge covered the family home as well. Her consent, therefore, was not a fully informed consent and on that ground was in my opinion invalid.
25. It was submitted on behalf of the bank, however, that as Mr. Dowley could not have known what was in Mrs. Smith’s mind, the bank was not affected by the fact that she did not know that the charge included the family home as well as the land. I reject this submission for two reasons. Firstly, on the facts here the validity of the consent depends solely on whether Mrs. Smyth had full knowledge of what she was doing. That the bank was not aware of her lack of knowledge is immaterial. Secondly, the bank would be treated as having constructive notice of her lack of knowledge. This arises under s. 3 of the Conveyancing Act, 1882, the relevant part of which is as follows:-
“3. – (1) A purchaser shall not be prejudicially affected by notice of any instrument, fact, or thing unless –
(i) it is within his own knowledge, or would have come to his knowledge if such inquiries and inspections had been made as ought reasonably to have been made by him.”
26. If Mr. Dowley had enquired as to the state of knowledge of Mrs. Smyth in regard to what was covered by the charge, he would have discovered that she believed that it did not apply to the family home, and accordingly he is deemed under the section to have constructive notice of this since it would have been reasonable for him in the circumstances to make such an enquiry. The bank was concerned to get a good title under the charge, and this involved getting a valid consent from Mrs. Smyth, which in turn required that Mr. Dowley should make enquiries as to what she knew about the charge in order to ensure that she understood what she was being asked to consent to. If Mr. Dowley had made these enquiries, he would have discovered her lack of knowledge and been able to remedy it. And since the enquiries ought reasonably to have been made in the circumstances, the bank is treated as having constructive knowledge of what the enquiries would have revealed.
27. It was argued on behalf of Mrs. Smyth in the High Court that the bank had a duty to explain the charge fully to Mrs. Smyth and to suggest to her that she should get independent advice. In my opinion this is not correct. The bank did not owe any duty to Mrs. Smyth to take these steps. The reason they ought to have been taken by Mr. Dowley was to protect the bank’s own interests since if Mrs. Smyth had consented to the charge after it had been fully explained to her and after she had received independent advice it is unlikely that her consent could have been challenged. So it is correct that the bank ought to have done these things, but not because it owed Mrs. Smyth any duty to do so. The reason was to ensure that it got a good title to the land which was the subject of the charge.
28. I am satisfied in the circumstances that the charge given by Mr. Smyth to the bank is void by reason of his wife’s consent having been invalid.
29. It was further submitted on behalf of the bank that even if the consent were held to be invalid an order for possession of the land should nonetheless be made excluding the family home. It was argued that s. 3 made the charge void in respect of the interest in the family home only and did not affect the interest in the remainder of the land. This submission had not been made in the High Court and the defendants submitted that the Court should follow its well established jurisprudence that a matter which had not been raised at first instance should not be allowed to be argued on the appeal.
30. The Court has occasionally made exceptions to this rule but in my opinion it should not do so in the instant case. There is no evidence before the Court as to the boundaries of what the bank says would constitute the family home. Sub-section 2 of s. 2 provides that the family home “includes any garden or portion of ground attached to and usually occupied with the dwelling or otherwise required for the amenity or convenience of the dwelling.” Before this Court could enter on a consideration of this submission, it would have been necessary that the High Court should have decided how much of the land should be included with the dwelling as forming part of the family home. If that had been done, and the issue had been argued, this Court could have considered the point, but since there has been no finding as to what constitutes the family home, this is not possible.
31. It was submitted on behalf of the respondents that the charge constituted a single conveyance which could not be severed. This view found favour with Costello J. (sitting as a judge of the Supreme Court) in Hamilton v. Hamilton [1982] I.R. 466 where a wife was refusing to consent to a conveyance of a holding of 215 acres which included a family home. Costello J. said in his judgment at p. 490:-
“The effect of the proposed conveyance will be to convey this family home, even though there will be conveyed with the family home additional land which may not form part of it. Once a proposed conveyance includes a family home then, it seems to me, the provisions of s. 3, sub-s. 1 of the Act of 1976 apply to it and the written consent mentioned in the subsection is required – unless the transaction falls within one of the four exceptions set out in the section.
No arguments were advanced to support the alternative plea that the Court should sever the property and decide that written consent was required to a conveyance of the portion of the property comprising the family home but that no such consent was required to a conveyance of the remainder of the property. I do not think that such a contention is sustainable. I am satisfied that the Court is concerned with a proposal to convey a family home within the meaning of the Act of 1976 and that the written consent of the non-disposing spouse to this proposed conveyance is being withheld.”
32. Since I am rejecting the bank’s submissions for the reasons I have already given, it is not necessary to decide whether it would have been possible to sever the charge and declare it void in respect of the family home only. My inclination would be to agree with the view expressed by Costello J. but I think it preferable to reserve this point for decision on another occasion when the matter would be fully argued.
33. Counsel for the bank referred the Court to an unreported decision of Johnson J. in the case of Bank of Ireland v. Slevin [1995] 2 I.R. 454 which was a circuit appeal in which judgment was given on the 16th February, 1989. In that case the bank had been given a charge by way of deposit of title deeds on a farm which included the family home. The charge had been created in September, 1977, by the defendant and it would appear that it did not have the prior consent in writing of his wife. Johnson J. held that the charge could be severed with the result that it was void in respect of the family home only. As I have already indicated, I am not going to decide the issue of severance in the instant case so I express no view on the correctness or otherwise of Johnson J.’s decision, but the manner in which he dealt with the issue would support my conclusion that the Court could not make an order of severance in the instant case. Having indicated that he would grant a charge on such portion of the lands as did not comprise the family home, Johnson J. went on to say at p. 458 of the report:
“But I require a proper map to be produced setting out clearly the
family home, the offices attached thereto, the land which constitutes the amenity and convenience thereof including the avenue which Mr. Slevin has indicated is not contained in the map. The map itself I find quite inadequate and in the event of it being difficult to make a map then it should have been done by way of aerial photography.”
34. This passage indicates the type of evidence which ought to have been given in the High Court if this contention was going to be made. The question of the extent of the family home would then have become an issue and the High Court could have made a finding on it based on the evidence. In the absence of such a finding it is not possible now for this Court to consider the issue.
35. I would dismiss the appeal and confirm the decision of the learned High Court Judge.
Bank of Nova Scotia v. Hogan
[1996] IESC 2; [1996] 3 IR 239; [1997] 1 ILRM 407 (6th November, 1996)
Supreme Court
Murphy J. (O’Flaherty and Blayney JJ concurring)
1. This is an appeal against the order and judgment of Keane J made and given herein on 21 December 1992.
2. The order made by Keane J declared that the sum of £263,992.77 was secured, first, by the equitable mortgage created by the deposit made on 2 February 1987 by the first named defendant/appellant, Ben Hogan, of the deeds to the lands specified at numbers 1 and 2 in the schedule to the order (the premises known as numbers 77 Roebuck Downs, Dublin 14, and 32 Brookevale Downs, Rathfarnham, Dublin 14) on Mr. Hogan’s interest in the said lands and premises and, secondly, by the equitable mortgage created by the deposit made on 26 May 1989 by the second named defendant, Margaret Hogan, of the title deeds to the lands described as No. 3 in the said schedule (being the lands and premises known as St. Rita’s, Kilternan, Co. Dublin) on Mrs. Hogan’s interest in those premises. The order of Keane J went on to set out the directions and provisions ordinarily contained in a primary order in mortgage proceedings.
3. The particular issue which Keane J tried on oral evidence evolved from a pleading contained in paragraph 7 of the defence filed by the defendants herein on 25 October 1991. Having averred that Mrs. Hogan did not give any security to the plaintiff/respondent the pleadings went on to allege as follows:-
4. If the second named defendant did give any such security (which is denied) which was valid (which is denied) same was obtained from her improperly or unconscionably and by reason of the inequality of bargaining power which existed between herself and the plaintiffs and by reason of their undue influence over her and ought to be declared void on that account and by reason of the fact that the plaintiffs by their servants or agents represented and agreed that as a condition of and in return for a deposit of title deeds by her they would advance the sum of £75,000 to the first named defendant or to Drefflane Associates Ltd if he so directed, which advance the plaintiffs failed or refused to make.
5. The background against which that issue fell to be considered may be summarised by reference to the judgment of the learned trial judge in the following terms. On 23 January 1987, the plaintiff (the bank) agreed to advance the sum of £150,000 to the first named defendant (Mr. Hogan). As security for that advance Mr. Hogan made an equitable deposit with the bank of the title deeds to three residential properties which he owned, i.e., Nos. 69 and 77 Roebuck Downs, Goatstown Road, Dublin 14, and 32 Brookevale Downs, Rathfarnham, Dublin 14. The sum was duly advanced and on 28 January 1988 the amount due by Mr. Hogan on foot of the advance to the bank including interest, was £189,285.79. On that date, by agreement between the bank and Mr. Hogan, the then existing facility was converted into a term loan from the bank to Mr. Hogan in the sum of £190,000 which was to be repaid with interest in five equal annual instalments, the first instalment to be paid one year from the date of the agreement.
6. The title deeds to St. Rita’s, Kilternan, were deposited with the bank on 26 May 1989 by Mrs. Hogan and controversy existed as to the purpose for which such deposit was made or perhaps, more particularly, the extent of the security which it was intended thereby to create.
7. It is common case that the advance in January 1987 was made to Mr. Hogan to enable him to purchase as an investment the two properties, namely, 77 Roebuck Downs and 32 Brookevale Downs. Mr. Hogan was also a controlling shareholder of a company called Drefflane Associates Limited (‘the company’). The company was advanced substantial sums from time to time by the bank. Ultimately the bank called in its loans to the company and, payment not being forthcoming, appointed a receiver under the powers in that behalf contained in the mortgage debenture which it held over the assets and undertaking of the company. It was part of the defence of Mr. and Mrs. Hogan that the bank was at all times in a fiduciary position in relation to them and also exercised a position of dominance over them. Mr. and Mrs. Hogan contended that the sum claimed by the bank was not a loan to Mr. Hogan but was part of, and related to, the finances made available to the company and that the bank negligently and in breach of its fiduciary duty so acted in relation to the company as to render it incapable of carrying on business.
8. In 1989 Mr. Hogan wished to sell two of the properties the title deeds to which had been lodged by him with the bank by way of security, namely, Nos. 69 and 77 Roebuck Downs. The bank contended that it had agreed to release the two properties from the equitable mortgage provided that the title deeds of St. Rita’s were lodged with it in substitution for the deeds of the properties being sold. In the event only number 69 was sold and the title deeds of St. Rita’s were undoubtedly deposited with the bank. Mr. and Mrs. Hogan put forward a different explanation of the arrangement. They said that the bank had agreed to advance the sum of £75,000 on the security of the deeds of St. Rita’s and further that this loan would be repaid out of the profits of the company. The borrowers maintained that they had been assured that this was a temporary arrangement and that the deeds would be returned to Mrs. Hogan within a few months. More particularly the defendants contend that Mrs. Hogan made the deposit when she was acting under the influence of the bank and without independent legal advice.
9. It was not disputed that Mrs. Hogan purchased St. Rita’s for a sum in the order of £79,000 of which approximately £71,000 was made available to her by the company. The amount so paid by the company to Mrs. Hogan – with the knowledge of the bank – represented the repayment of monies advanced by her to the company to pay staff wages from time to time. Messrs Orpen Franks & Co., solicitors, acted for Mr. and Mrs. Hogan in relation to the purchase of the various properties with which these proceedings are concerned. In addition they acted for the bank from time to time.
10. Arrangements were made for Mrs. Hogan to deposit with the bank the title deeds to St. Rita’s. The deposit was to be made on 26 May 1989. A few days before that Mr. Jackson of Orpen Franks & Co. told Mrs. Hogan that the title deeds were required by the bank to secure the advances made to Mr. Hogan. Some discussion took place between Mr. Jackson and Mrs. Hogan in the course of that conversation in relation to the transaction.
11. On the occasion of the deposit on 26 May 1989 there was present, Mr. John Farrell a manager of the bank, Mr. Brian Perry, the area manager of the bank for the land, Mr. Hogan, Mrs. Hogan and Mr. Edward Hickey then a solicitor in the firm of Orpen Franks & Co.
12. There is a significant dispute between the parties as to what took place on that occasion. Mrs. Hogan gave positive evidence as to her understanding as to the bargain between the parties and the extent of the security which she had agreed to provide. It was her evidence that the security was limited to the sum of £75,000 which was to be advanced by the bank to Mr. Hogan or the company. It was the evidence of the officers of the bank and of Mr. Hickey that the security was to extend without limitation to any indebtedness on the part of either Mr. Hogan or Mrs. Hogan. On that fundamental issue of primary fact the trial judge found in favour of the bank and rejected the version put forward on behalf of the defendants/appellants.
13. In addition Mr. Hickey gave evidence of the fact that he had explained to Mrs. Hogan at the meeting in the bank that she was under no obligation to make the deposit which she did in fact make on that date but that if she did so the bank would be entitled to sell the property in the event of a default by her husband. Mr. Hickey’s evidence in that respect was confirmed by Mr. Farrell and it was supported by a detailed memorandum prepared and signed by Mr. Hickey some five days afterwards, which memorandum was admitted in evidence. Again the learned trial judge accepted the evidence of Mr. Hickey to the effect that he had given advice in the terms set out in the memorandum.
14. Whilst the greater part of the argument before this Court (and much of the judgment of the learned trial judge) related to the sufficiency of the advice given by Mr. Hickey, or indeed Mr. Jackson, to Mrs. Hogan it must be recognised that once Mrs. Hogan’s version of the events was rejected there was no evidential basis to ground an argument that she had been misled or overborne or would or might have acted differently in the event of her obtaining more comprehensive legal advice.
15. The independence of the advice was challenged on the basis that Messrs Orpen Franks & Co. had undoubtedly and admittedly acted for the bank in relation to other matters. Apart from any potential conflict of interest it was contended on behalf of the appellants that the circumstances in which the advices – if that is what they were – were given were so unsatisfactory as to render the advice worthless. The complaint was made that the consultation between Mr. Hickey and Mrs. Hogan took place in the bank and in the presence of its officials and more particularly it took place at a time when Mrs. Hogan was effectively committed to the transaction. It was argued that independent legal advice should be given privately and in good time so that a client could, without undue embarrassment, withdraw from a transaction if that was to be the outcome of the advice given to her or to him.
16. Objections were also made to the content of the advices or information provided for Mrs. Hogan. It is clear that what Mr. Hickey did was to explain to Mrs. Hogan the legal consequences of making the deposit of title deeds. It was not suggested by him that he offered any advice as to the prudence of engaging in such a transaction and, indeed, he very fairly conceded that he knew nothing whatever of the financial affairs of Mr. or Mrs. Hogan or how the relationship between Mr. Hogan and the company might impinge upon the transaction.
17. The learned trial judge concluded that the bank had ensured that advice available to Mrs. Hogan was adequate in all the circumstances. The learned judge also pointed out that the transaction could be viewed, quoad Mrs. Hogan as a normal banking transaction as that expression was explained by Lord Scarman speaking in the House of Lords in National Westminster Bank plc v. Morgan [1985] 1 All ER 821 and in that event no special relationship or position of dominance on the part of the bank would arise which would require the giving of independent legal advice.
18. In this Court the onus on the bank to prove the validity of the equitable mortgage or, alternatively, the obligation on it to provide advice was explored by reference to two cases, one Irish and the other English which were decided and reported subsequent to the judgment of the learned trial judge, namely, Bank of Ireland v. Smyth [1995] 2 IR 459; 1 ILRM 241 and Barclays Bank v. O’Brien in which the decision of the Court of Appeal was reported at [1993] QB 109 and that of the House of Lords at [1994] 1 AC 180.
19. Whilst there is a similarity between the facts in Bank of Ireland v. Smyth and certain of the facts in the present case there is also a fundamental difference which renders the Irish case of little assistance in resolving the problems which arise here.
The Smyth case did concern a dealing by a spouse with a matrimonial home in circumstances which were likely to be – as the events proved – to her detriment and that of the family. Those facts indicate the resemblance with the situation in which Mrs. Hogan found herself. On the other hand the crucial distinction is that Mrs. Hogan was dealing with property of which she was the owner whereas Mrs. Smyth was being asked to give and purported to give her consent under s. 3 of the Family Home Protection Act 1976 to a mortgage of the family home by her husband. Whilst it might appear that a person dealing with his or her own property is entitled to as much protection as a person called upon to give a consent in relation to a dealing with the property by another that is not the case. The analysis made by Blayney J of the 1976 Act and in particular s. 3 thereof shows why this is not the case. As a result of s. 3(1) of the 1976 Act certain dispositions of an interest in a family home are void unless the purported conveyance by one spouse is made with the consent of the other. From that statutory provision two consequences flow, first, that a grantee or purchaser must, in his own interest, ensure that the necessary statutory consent is forthcoming and, secondly, that the consent, if given, is a true consent, that is to say, constitutes a decision which represents a fully free exercise of the independent will of the spouse concerned. Thus cases turning on the adequacy of a consent required and alleged to have been given under the Family Home Protection Act 1976 are distinguishable from those in which it is alleged that a spouse in the dealing with his or her own property did, or may have, acted under undue influence.
20. The decision in Barclays Bank v. O’Brien is, however, both relevant and helpful. In that case the first and second named defendants therein, a husband and wife, agreed to execute a second mortgage of their matrimonial home as security for overdraft facilities extended by the plaintiff bank to a company in which the husband, but not the wife, had an interest. The wife signed the deed of mortgage without reading it in reliance on her husband’s false representation that it was limited to £60,000 and would last only three weeks. When the company’s overdraft exceeded £154,000 the bank sought to enforce the mortgage and obtained an order for possession thereof. The judge of the High Court dismissed the wife’s appeal holding that since there was no evidence that in deceiving his wife the husband was acting on behalf of the bank it, the bank, could not be held responsible for his misrepresentation and therefore the charge was enforceable against her. That decision was reversed on appeal to the Court of Appeal and their decision was upheld by the House of Lords. The lengthy judgments delivered in the Court of Appeal, and in particular that of Scott LJ, reviewing the numerous, and sometimes conflicting, authorities in relation to the presumption or possible presumption of undue influence by a husband over his wife demonstrate the difficult problems which exist in this area of the law.
21. In the single speech delivered in the House of Lords by Lord Browne-Wilkinson an effort was made to resolve conflicting principles which had been identified in the Court of Appeal. No difficulty arises in relation to the well established propositions identified by him, namely that, (i) as between the innocent party and the alleged wrongdoer the burden of proving the exercise of undue influence falls on the innocent party; (ii) there are, however, recognized categories of relationships within which there is a presumption that the alleged wrongdoer has abused his position so that the onus is on him to prove that such was not the case; (iii) the decision in Bank of Montreal v. Stewart [1911] AC 120 determined that the relationship between husband and wife did not as matter of law raise a presumption of undue influence by a husband over his wife. Notwithstanding the fact that the relationship of husband and wife has been held not to raise a presumption of undue influence some special status does appear to have been accorded to wives in a variety of decided cases. Scott LJ referred to married women being treated by the law ‘more tenderly’ than others and in the Australian case of Yerkey v. Jones (1939)63 CLR 649 Dixon J referred to ‘the invalidating tendency’ applied by the courts in relation to transactions between a husband and wife. The consequence appears to be that whilst the matrimonial relationship as such does not give rise to a presumption of undue influence it may be possible to identify circumstances in a particular case which would more readily raise that presumption in favour of a wife than any outside party. I confess that I do not find the conclusions of the House of Lords in this regard satisfying as a matter of legal logic or fully acceptable as an analysis of the rights or capabilities of women generally and married women in particular.
22. However the issue in the present case does not immediately concern the rights as between husband and wife but as between a creditor or other third party and the wife. These rights were analysed by Lord Browne-Wilkinson at p. 195 of the report in the following terms:-
23. A wife who has been induced to stand as a surety for her husband’s debts by his undue influence, misrepresentation or some other legal wrong has an equity against him to set aside that transaction. Under the ordinary principles of equity, her right to set aside that transaction will be enforceable against third parties (e.g. against a creditor) if either the husband was acting as the third party’s agent or the third party had actual or constructive notice of the facts giving rise to her equity.
24. The doctrine of notice lies at the heart of equity. Given that there are two innocent parties, each enjoying rights, the earlier right prevails against the later right if the acquirer of the later right knows of the earlier right (actual notice) or would have discovered it had he taken proper steps (constructive notice). In particular, if the party asserting that he takes free of the earlier rights of another knows of certain facts which put him on enquiry as to the possible existence of the rights of that other and he fails to make such enquiry or take such other steps as are reasonable to verify whether such earlier right does or does not exist, he will have constructive notice of the earlier right and take subject to it.
25. I would adopt and apply that reasoning to the facts of the present case.
26. The House of Lords went on to apply the ‘invalidating tendency’ and ‘tender treatment’ principles to the facts of the Barclays Bank case and concluded that having regard to the nature of the transaction guaranteed by the wife and the absence of any financial advantage to her that there was a presumption of undue influence so that the creditor was put on enquiry to satisfy himself that the wife’s agreement to stand surety had been properly obtained. By failing to make those enquiries Barclays Bank had constructive notice of the rights of the wife. The conclusion was expressed by Lord Browne-Wilkinson in the following terms (p. 196):-
27. Therefore where a wife has agreed to stand surety for her husband’s debts as a result of undue influence or misrepresentation the creditor will take subject to the wife’s equity to set aside the transaction if the circumstances are such as to put the creditor on enquiry as to the circumstances in which she agreed to stand surety.
28. Assuming, without deciding, that married women in this jurisdiction may in certain circumstances enjoy as against their husbands a presumption that undue influence was exercised and allowing that those circumstances existed in the present case the fatal flaw in Mrs. Hogan’s case is that no undue influence was exercised by her husband and that she has no equity against him to have the transaction set aside and, that being so, she has no prior equity on which she can rely in order to defeat the bank’s claim. The availability of appropriate independent legal advice to Mrs. Hogan would afford the bank a defence on a claim by her in respect of an equity to set aside the transaction if such equity had existed. But Mrs. Hogan had no equity. She did not allege that her husband misrepresented the situation or exercised undue influence over her. This is confirmed by the fact that she and her husband instructed the same solicitors and counsel to represent them.
29. With regard to the allegation that the bank itself exercised undue influence over Mrs. Hogan this was completely unsupported by any evidence. There was no evidence that any officer of the bank advised Mrs. Hogan that the borrowing would be limited to £75,000 or the security would be released after a limited period. Moreover Mrs. Hogan’s evidence to the effect that this was her belief was rejected by the learned trial judge. The relationship between the bank and Mrs. Hogan did not of itself give rise to a presumption of undue influence and no evidence was given as to the dealings between them which would raise an inference of any such wrongdoing. So far from it, it appears that Mrs. Hogan was contacted in relation to the deposit through her solicitor, Mr. Jackson, and she was attended in the bank on the occasion when the deposit was made by Mr. Jackson’s deputy, Mr. Hickey. There does not appear to have been any opportunity for the exercise of undue influence less still any evidence that it was so exercised.
30. In these circumstances it seems to me that the appeal must be dismissed.
Moyles v. Mahon
[2000] IEHC 197 (6th October, 2000)
Delivered extempore by the Honourable Mr Justice Thomas Smyth on 6th October 2000
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1. The Plaintiff is now aged 80 and lives in an old person’s home in Birr, Co. Offaly. He is a widower, his wife having predeceased him in September 1994. There were a number of children of the marriage, which seems to have been unhappy, the eldest of whom is the Defendant Mrs Mahon who married in 1968 and who is now a widow, her husband having died in March 1995.
2. The Plaintiff lived at Kinnitty, Birr, for many years. His mother apparently bought the house in 1935 for him and he moved in there in 1940.
3. In opening the case Mr Maguire described the family as fractious and the evidence certainly bore that out.
4. In the differences between the Plaintiff and his deceased wife the Defendant, while not wishing to cut off her mother, tended to side with the Plaintiff in such rows as occurred. The Defendant’s home appears to have been a haven from the turmoils of Kinnitty for the Plaintiff where he was made welcome and treated with that degree of affection which a dutiful and affectionate daughter could be expected to show to a parent. The Plaintiff went to live with the Defendant in 1991.
5. In 1991 things came to a head in Kinnitty. From a situation of having a regular routine of Christmas dinner and Sunday lunch at the Defendant’s and intermittent visits as a respite home, things changed to a structured position of residence. This came about as a result of matrimonial proceedings between the Plaintiff and his wife. The proceedings in the District Court concluded in a barring order being made in or about October 1991. The Plaintiff was naturally very upset
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about this as it meant him having to leave Kinnitty which (notwithstanding that he and his wife lived in separate sections of the house to the extent that there were two front doors) he felt was his home. He contacted the Defendant and did not turn to her in vain. He found accommodation with her in her home. Later, because of some rather unsocial habits (coming in in the early hours of the morning after a night of playing cards; putting on the television; smoking in his bedroom; coughing and making some noise) the Defendant became worried and anxious for the peace and good order of her home. Eventually the Plaintiff’s accommodation was to change to what has been variously called a shed and an apartment, being some form of outhouse or out-building altered and adopted for residential use. At all times the Plaintiff’s meals, other than breakfast on frequest occasions, and his laundry were looked after by the Defendant.
6. Very shortly after the barring order was made and when the Plaintiff was residing with the Defendant he transferred ten-and-a-half or eleven acres of land the subject of Folio 8511 County Offaly, which Mr Enright, the auctioneer called on behalf of the Plaintiff, valued at £16,000 as at 1991 and in respect of which Mr Shepherd’s valuation this morning was considerably lower.
7. The transfer of 27th November 1991 of this land is sought to be set aside for a variety of reasons set out in the pleadings but which were confined at the hearing to (1) the improvidence of the transaction; (2) the absence in the deed of a revocation clause or a right of maintenance and support or a right of residence; (3) the lack of independent legal advice.
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8. Other than the time sequence referred to, the circumstances were that the Plaintiff presented himself with the Defendant to Mr James Lucey, solicitor. Mr Lucey had been his solicitor in the matrimonial proceedings and knew the Plaintiff quite well and got on well with him. Mr Lucey described the Plaintiff as well versed in the ways of the world, placid but determined and an experienced businessman (the Plaintiff had been a butcher for years and dealt in cattle and sheep; he had bought and sold property and helped to the extent of some £70,000 his son Eddie, elsewhere described as £50,000, to buy a property at Mount Bolus; he had given sums of money, machinery and sheep to various members of the family who were grown up and either married or independent).
9. Mr Lucey tried to dissuade the Plaintiff from disposing of his land because a Will would have been quite sufficient. Mr Lucey thought that the Plaintiff wished to reward the Defendant or show her loyalty as she was his sole family ally in the matrimonial dispute. He also thought that the Plaintiff may have wanted to get back at the other members of the family. Mr Lucey was absolutely clear that the Plaintiff unreservedly wanted to transfer the land without reservations and was adamant that he wanted to give the land to the Defendant.
10. Mr Lucey gave the Plaintiff careful and considered advice. Notwithstanding the absence of a written record, I am satisfied that Mr Lucey advised the Plaintiff against proceeding to divest himself of the property and that the concerns pleaded to and advanced in court were properly put to the Plaintiff.
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11. Having carefully considered the evidence of Mr Lucey, I was left with the clearest impression of a sound and sensible man who, no matter what advice he was given, was going to do what he wanted to do. Mr Lucey knew the Defendant with whom he did not have a particularly easy relationship due to an outburst by her in the District Court during the Plaintiff’s matrimonial proceedings (in the events that later occurred in 1992 Mr Lucey came off record and refused further instructions). The Defendant was not a client of Mr Lucey and his only knowledge of her appears to have been as I have indicated.
12. On the basis of Mr Lucey’s evidence I am satisfied that the advice given by him was of an independent character.
13. Elsewhere in his evidence Mr Lucey described the Plaintiff as a pragmatist, genial, very resilient and very determined but calm; that he had considered that he had taken care of the whole family; that he had in the past sold a schoolhouse in Kinnitty for about £4,000, a transaction with which the Defendant may have been involved. Mr Lucey knew the Defendant but never acted for her.
14. Notwithstanding the foregoing, Mr Lucey felt that the Plaintiff should have further legal advice as the transaction was a voluntary conveyance. Accordingly, he gave the Plaintiff a list of about six local solicitors from which the Plaintiff, not the Defendant Mrs Mahon, chose Mr Tom Dalton. The Plaintiff and the Defendant having left Mr Lucey’s office, Mr Lucey inquired by telephone if Mr Dalton would be prepared to advise the Plaintiff on the transaction, which Mr Dalton duly did. Mr Dalton very briefly reported to Mr Lucey and the transaction
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proceeded to a conclusion.
15. Mr Dalton went to meet the Plaintiff at the house of the Defendant where he was living at the time. Mr Dalton had once acted for the Defendant when she purchased a property in Galway. Mr Dalton spoke to the Plaintiff for about half an hour in the absence of the Defendant. He received the deed from the Defendant on his arrival and gave it back to her at the conclusion of the meeting. Mr Dalton was quite clear that the Plaintiff was not under any duress. Furthermore, notwithstanding explaining to the Plaintiff the finality of the transaction and advising him on the question of revocation, maintenance and residence (I accept that the question of residence may have been tangential because there was no residence on the land) the Plaintiff was simply not interested in all this advice and that all the Plaintiff wanted was for the Defendant to have the land with no strings attached. Mr Dalton was clear that the Plaintiff knew what he was doing and acted independently and freely of his own accord.
16. Mr Dalton may not have made exhaustive inquiries as to all the assets and liabilities of the Plaintiff’s estate but I have no doubt that he was acutely aware of these as, according to Mr Lucey, the District Court order in the matrimonial proceedings was under appeal by both parties at this time. In the circumstances I think that it would have been both inappropriate and perhaps unprofessional for Mr Dalton to inquire into matters which were outside the scope of the limited duty undertaken by him and when the Plaintiff had his own solicitor. I am satisfied and find as a fact that the deed is that of the Plaintiff and resulted from an exercise of his own free will.
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17. As Mr Lucey had come off record in the Plaintiff’s matrimonial proceedings the Plaintiff consulted Ms Bernadette Owens, Solicitor, in or about March 1992. Miss Owens never had anything to do with the 1991 transaction. Her instructions were to prosecute the appeal in the Circuit Court. Between March and November 1992 Ms Owens came to deal with at least the five following items of business for the Plaintiff: 1. The matrimonial proceedings in the Circuit Court. At one stage Ms Owens went to the office of J. J. Kennedy, solicitors, in Birr where she had arranged to meet the Plaintiff to go through all the various assets and liabilities of the parties to the matrimonial action. 2. A dispute concerning the key to a gate associated with a hairdressing salon, a separate part of the property at Kinnitty. 3. The question of an assault by Percy Moyles on the Plaintiff and the Defendant. 4. A dispute concerning the issuing by Canada Life of a cheque or draft in respect of the redemption of what appears to have been a joint entitlement in a single name. 5. A Will for the Plaintiff on his instructions at that time. At this time he wanted to know his rights as the surviving spouse.
18. The outcome of the matrimonial proceedings was that the court sanctioned the division of the Kinnitty property into two separate and segregated units, one for the wife and one for the husband. Now that finality had been arrived at (if finality can ever be said to exist in matrimonial disputes) the Plaintiff was anxious to go back to Kinnitty. When he attempted to return, however, he found that the section of the property that had been allocated to him had been ransacked and was uninhabitable, which quite naturally upset him. The rancour that seems to be part of the Kinnitty property and the cost of restoration, seen
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cumulatively with his relative comfort at the Defendant’s premises, seem to have convinced the Plaintiff after a brief interval that he was better off living with the Defendant in Banaher.
19. While accepting that there may be some self-interest in the depiction by the Defendant of the life of the Plaintiff, she was not seriously challenged that the Plaintiff was a genial sociable man, fond of cards and interested in hurling and that most weeks he was out six out of seven nights. Ms Owens does not appear to have had any dealings with the Plaintiff between November 1992 and September 1994.
20. Immediately after the death of his wife in early September 1994 the Plaintiff called on Ms Owens at her office. Both he and the Defendant were not recognised in the death notice in the newspaper, presumably arranged by other family members. When the Plaintiff and the Defendant called on Ms Owens on the day after the funeral the Defendant simply brought her father to the office. The Plaintiff was upset that the house at Kinnitty had been stripped of many items of furniture and effects, items that had been regarded as either bought or as family possessions. On the following day Ms Owens wrote to the solicitors for the deceased. Ms Owens stated that the Plaintiff said that he wanted a third of his wife’s estate in or about this time or shortly thereafter.
21. At no time during the various transactions in 1992 or in September 1994 was the question of a transfer of lands mentioned or discussed by the Plaintiff. He had, as Ms Owens said, left the Kinnitty property to the Defendant in his 1992 Will. Ms Owens said that her first note
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about the transfer of the house in Kinnitty is dated 7th October 1994. When the matter was put to Ms Owens by Mr Maguire, her evidence was that she said to the Plaintiff that he need not be in any hurry about it because he had made a Will in favour of the Defendant. The Plaintiff was alone with Ms Owens when she was giving him advice concerning this transaction. The Defendant was not present during the time devoted to that element of advice and had not been present at a later stage when the transfer was being read over to him. Ms Owens also said that the Plaintiff understood and agreed with its contents. While Ms Owens did not have a very detailed note of her consultation, I am fully satisfied and find as a fact that she advised the Plaintiff about the finality of the deed, explained to him the various ‘reservations’ that he should consider in his own interest, that is a revocation clause, a clause providing for maintenance and support, and advised him that there was no need for him to transfer the property at that time because there was a Will in place to that effect. Ms Owens clearly understood that the Plaintiff, notwithstanding her advice and attempts to dissuade him from going ahead with the transfer, wanted and was determined to have finality. The Plaintiff’s determination was perfectly understandable in view of the unhappy history of the Kinnity property and the shameful family events of the previous month.
22. A considerable time was spent in cross-examining Ms Owens who had a very detailed knowledge of the Plaintiff’s affairs through dealing with the matrimonial proceedings. It was put to her forcefully that she was acting for both parties. Ms Owens said that she did not know the Defendant, save perhaps by sight, had never acted for her or advised her in relation to this transaction or any other transaction
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and did not know much about her, Ms Owens, who was so clearly a truthful witness, said that if she had known that the transaction had the type of bargain contended for, that is, that in addition to natural love and affection the Plaintiff would live with the Defendant for the rest of his life and that the Defendant would look after him, she would not have let the Plaintiff sign the deed but would have tried to defer it if she had known that the Defendant would not keep such a bargain.
23. However, I am satisfied and find as a fact that there was no such bargain; if there was, it was not expressly conveyed to Ms Owens. She may have surmised, as Mr Lucey did, that there may have been some amicable family understanding as between the Plaintiff and the Defendant. As in the case of Mr Lucey in the 1991 transaction, the Plaintiff knew what he wanted to do and did it.
24. When the deed was typed up it was read over to both parties who understood it and signed it. Some two weeks later both parties called back to Ms Owens on 25th October 1994. When she read over and explained to the Plaintiff in the presence of the Defendant the contents of both the Declaration of Insolvency and the Family Home Declaration, the Plaintiff, she says, understood them. The Defendant agreed to discharge the fees and stamp duty on the transaction. Ms Owens was left with the clear impression that the Plaintiff was content to have brought finality to the business, and I find as a fact that it was a free act of the Plaintiff.
25. There was much evidence concerning events which occurred after the execution of both deeds,in particular in 1996. The issues arising
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from this part of the evidence seem to me to be largely irrelevant to the question of the validity of the deed. If, as alleged by the Plaintiff, the Defendant failed to fulfil the alleged bargain to look after the Plaintiff for the rest of his days, this of itself would not affect the validity of the deed. On the other hand, if the deed is invalid, then no matter for how long and how well the Defendant looked after the Plaintiff after the execution of either deed would not of itself render them valid. However, since the issue of the allegation to honour an alleged bargain has been raised, in general I accept and prefer the account of the Defendant.
26. As to the Plaintiff’s dealings with the 11 acres post-1991 (referred to at page 50, question 448 of the Plaintiff’s own evidence) and his post-1994 conduct regarding the house, the indication is that, notwith-
standing the Defendant’s ownership, she allowed him dignity, a sense of usefulness, of having choice and a sense of interest and involvement, and I find such as a fact.
27. I realise that I would wish to be more firm in reaching this view but as at July 1999 the Plaintiff was, unfortunately, regarded as so infirm as to be unable to come to court and his evidence was taken on commission. Accordingly, I did not have the opportunity of assessing the Plaintiff as a witness. I am unimpressed, however,by his refusal or failure to answer a considerable number of questions during the course of his evidence in July 1999, in particular questions 301, 302, 383, 385, 419, 420, 425, 426 and 456. His failure of recollection in other matters of five or eight years earlier is understandable.
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28. Neither party impressed me with the evidence regarding the sums of money. In my view it is an unproven and unsustainable claim.
29. The submissions on behalf of the Plaintiff were as follows:
(1) There is a position of undue influence presumed for the following reasons:
(a) the special relationship of the parties;
(b) the apparent improvidence of the transactions;
(c) the absence of a revocation clause;
(d) the absence of any consideration having regard to the overall assets of the Plaintiff.
(2) There was no independent legal advice, the question arising being whether the transactions were free and independent acts of a man having full advice. Was he emancipated?
(3) Shortly before the execution of the transfers the relationship between the parties was such as to raise a presumption that the Defendant had influence over the Plaintiff. The transfers should be set aside unless the court is satisfied that the gifts in the transfers were the spontaneous free acts of the Plaintiff in circumstances which enabled him to exercise an independent will and which justifies the court in holding that the gifts were the result of a free exercise of the donor’s will. It is submitted that the court should hold on the evidence that a deemed-to-be-coerced situation existed because (a) the Plaintiff did change his mind from time to time; (b)that if, as suggested by the Defendant, the Plaintiff was susceptible to influence by his son Eddie, so also he should be regarded as susceptible to influence by the Defendant.
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(4) The decision of the Supreme Court in Carroll v Carroll [2000] 1 ILRM 210, in particular the passages from the judgment of Denham J. at page 223 dealing with the public policy dimension of deemed undue influence and also her consideration at pages 224 and 225 of the presumption of undue influence are applicable in the instant case.
(5) The nature and quality of the legal advice was deficient because of (a) the absence in both deeds of the safeguards of clauses of revocation; (b) the adequacy of clauses of revocation, maintenance and support and a right of residence; (c) adequacy is not necessarily an expression of free will; (d) Mr Dalton’s evidence disclosed that (i) his recollection was inaccurate in that he did not remember taking an attendance and (ii) he was unaware of the Plaintiff’s general circumstances; (iii) he was not independent because he had in the past acted for the Defendant who, on the occasion of his visit, gave him the actual deed.
(6) All the solicitors said what they would have advised but none had a note to this effect. If notes existed of their attendances on the Plaintiff saying that, the notes did not disclose all they said they would have done, in particular the distinction in character and effect of the deed as opposed to the element of revocability.
(7) In particular, Ms Owens when acting for both parties was wanting in documentary evidence as to the nature and extent of the advice which she gave to the Plaintiff. In the circumstances there must be documentary evidence to corroborate the advice stated in evidence to have been given.
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(8) When the transactions took place in 1991 and 1994 the occasions of vulnerability of the Plaintiff should have been most particularly guarded against.
30. The submissions on behalf of the Defendant were as follows:
(1) The case is distinguishable on its facts from the several cases relied upon in opening by Mr Maguire.
(2) McCormack v Bennett [1973] ILT 127 is still applicable and is the case most closely analogous to the facts in the instant case and should be followed and applied.
(3) The decision of the Supreme Court in Carroll v Carroll , particularly the judgment of Barron J. at pages 231 and 232 of the report, indicates not the position contended for by the Plaintiff but one in which the position is on a case-by-case decision on facts based on the legal principles enunciated in Carroll v Carroll and in the earlier cases therein referred to.
(4) The quality of the legal advice in all instances was quite adequate and sufficient. Mr Lucey and Ms Owens both fully understood the Plaintiff’s circumstances. While Mr Dalton may not have done so, the position is that his advice was still adequate in all the circumstances.
(5) The Plaintiff was well versed in dealing with property and had dealt with other members of the family and looked after them as he considered appropriate, which is borne out by the evidence of Mr Lucey.
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(6) The Plaintiff was not an innocent abroad, as borne out by the evidence not merely of the Defendant but of the various other witnesses, particularly the evidence of the solicitors all three of whom had met the Plaintiff at different times in different places and in different circumstances. All considered him to be a man of calm deliberation but very determined.
(7) The departure of the Plaintiff from Banaher was not as stated by him but as contended for by the Defendant.
(8) The position about the moneys was unconvincing and there was no vouching. To the extent that amounts could be established, other members of the family did receive moneys in or about the same time and of the same order as the Defendant.
31. In summary, my findings are as follows:
(1) Neither the 1991 nor the 1994 deed was executed as a result of undue influence or duress on the part of the Defendant.
(2) The Plaintiff had no mental or physical infirmity which prevented him from understanding the nature and consequences of either deed.
(3) The Plaintiff had the benefit of independent advice from the solicitor of his choice and that advice was fully and carefully made available to him.
(4) The possibility of a clause of revocation was explained to the Plaintiff. The desirability of making a revocable disposition of his property was urged upon him.
(5) Both deeds are on their face improvident in that the Plaintiff disposed of his entire interest or estate in the properties without
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valuable consideration.
(6) Mr Lucey did surmise and Ms Owens had a general understanding that the Plaintiff was executing the deed in favour of the Defendant for looking after him or would look after him.
(7) If there was, as contended for by the Plaintiff, a bargain in the terms alleged, same was not fully expressed to any of the solicitors -Mr Lucey, Mr Dalton and Ms Owens.
(8) The preliminary letter dated 20th March 1997 from the Plaintiff’s solicitor contains no mention of any deal, agreement or bargain.
(9) There was no deal or bargain or arrangement made between the Plaintiff and the Defendant that in consideration for looking after him for the rest of his life or that in consideration for going to live with the Defendant he would transfer either property.
(10) The Plaintiff executed both transfers in his expectation and belief, not induced by the Defendant, that he would secure or reinforce what he believed to be the genuine loyalty and affectionate attention of his daughter the Defendant.
32. It seems to me that the concluding remarks of Finlay J. in McCormack vBennett [1973] ILT 127 at page 131 are apposite:
‘I accept and adopt as applicable to this case the reasoning of Mr Justice Budd in the case of Gregg versus Kitt reported in 1956 Irish Reports at page 183. In particular I would adopt and repeat the portion of his judgment at page 196 where he says “Where the relations between the donor and another person raise a presumption that that other person had influence over the donor and the evidence shows that the third party is both closely related to the donee and was closely associated in action and interest with the donee at the time of events leading to the transaction it would seem to be on principle that the onus in such circumstances must be likewise thrown on the donee to establish that the gift resulted from the free exercise of the donor’s will. The presumption may of course be rebutted either by showing that the donor has had competent independent advice and acted of his
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own free will or in some other way.”
‘As Lord Hailsham says in Inche Noriah versus Shaik Allie Bin Omar “The most obvious way to prove that the gift was the result of the free exercise of independent will is to establish that the gift was made after the nature and effect of the transaction had been fully explained to the donor by some independent and qualified person so completely as to satisfy the Court that the donor was acting independently of any influence from the donee and with full appreciation of what he was doing.” If that method of rebutting the presumption is adopted and it is not the only method open the advice relied on must in the words of Lord Hailsham be given with a knowledge of all relevant circumstances and must be such as a competent and honest adviser would give if acting solely in the interests of the donor.
‘The ignorance by Mr Wallace at the time when he was advising the late James Seery of the promises made by Mrs Bennett in respect of a transfer of the land meant that he was not a person with knowledge of all relevant circumstances. If to defend this deed and to discharge the onus which is in my view upon her the defendant must rely only on the independent advice of Mr Wallace she must therefore fail. However, from the passage which I have quoted that Mr Justice Budd was of the view and in this I am in full agreement with his judgment that the presence of full and satisfactory independent advice is not the only way of proving that a voluntary deed even though it may be on the face of it improvident resulted from the free exercise of the donor’s will. I am satisfied that James Seery in October 1967 himself was particularly concerned to make an out and out transfer of these lands by deed to his daughter Mrs Bennett. I am satisfied that that idea for practical purposes originated with him and certainly did not originate with the defendant Mrs Bennett. His reason for making such a transfer instead of a will which would have been revocable was I am satisfied that he wanted a permanency and finality with regard to the disposition of his affairs. I think it is a reasonable inference from the evidence which I have heard that he was a sufficiently astute man to know that no form of bargain or commercial transaction concerned with his land was likely to secure for himself and his wife what they really needed and that was personal care and attention granted largely through affection and kindness by a member of their family. I believe therefore that James Seery when he executed this deed did so in the expectation and belief which was his own and not induced to them that by so doing he would secure or reinforce what he believed to be the affectionate attendance of his daughter for both himself and his wife. In these circumstances I conclude that there is evidence before me which I accept other than and in addition to the evidence of the independent advice which James Seery received before executing the deed which satisfies me that the deed was his own act and resulted from an exercise of his own free will. In these circumstances as I understand the legal principles applicable I must uphold this deed even though it may on the face of it appear improvident and even though events which occurred after its execution may have made James Seery in his lifetime dissatisfied with it.’
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33. I now proceed to deal with the submissions of the Plaintiff in reply:
(1) There was indeed a situation which would give rise to presumed influence because of the relationship of the parties. The transaction, as I have already held, is improvident. There is no revocation clause and there are no rights reserved. Mr Lucey (who drafted the first deed and gave advice against proceeding) and Ms Owens (who drafted the second deed and gave advice against proceeding) both had full knowledge of the affairs of the donor. Mr Dalton did not. That does not in any way diminish the fact that Mr Dalton was consulted at the behest of Mr Lucey.
(2) Was this man emancipated? The answer to that is an unequivocal yes.
(3) Was the relationship between the parties shortly before the execution of the deed such as to raise the presumption that the Defendant had influence over the Plaintiff? There is certainly some evidence of a sense of dependency. However, I am quite satisfied that the Plaintiff’s decisions were made in each instance to bring to an end the unhappy circumstances in which he found himself and that he was the originator in each instance. There is no evidence that he was prompted, cajoled or induced to take either of these courses. In my view the Plaintiff exercised a spontaneous act of free will in both instances, and that is taking into account the submissions very properly put and skilfully argued by Mr Maguire of the deemed-to-be-coerced situation. I do not believe that the Plaintiff’s change of mind indicates a man of fickleness. Changes were made at different times in different circumstances for what appeared to be good and valid reasons. His susceptibility to influence, as suggested, is part of the peripheral dimension to this case which has not surfaced in court and which is
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clearly rumbling in the background. At the time he was dealing with these two transactions the Plaintiff was not, in my opinion, susceptible to influence. I am quite satisfied that the solicitors gave the Plaintiff time, assessed him, and knew what they and he were about. I do not believe that he was susceptible to influence in any way.
(4) The principles in Carroll v Carroll are still applicable and germane. In Carroll v Carroll the facts are totally distinguishable. In this regard I totally agree with Mr Abbott’s submission. In Carroll v Carroll Mr Joyce acted for Mr Carroll Junior who literally brought his father along by the hand at a time when he was devastated by his wife’s death, unlike the situation here, where Mr Carroll had told his daughters who were coming up and down to Dublin that there would always be a home for them there and who, when Thomas Junior came to running the business, assisted him. The whole series of circumstances until the daughters fell out with their sister-in-law is quite different and quite unrelated to the circumstances in the present case.
34. The nature and quality of the legal advice clearly differed because the times, circumstances and knowledge of the different solicitors varied. However, the two solicitors acting for the Plaintiff, Mr Lucey and Ms Owens, knew about his affairs and had plenty of opportunity of sizing him up. Mr Dalton, who met the Plaintiff once, was satisfied that he was a man with his wits about him and knew what he wanted to do. Having acted in the past for the Defendant Mrs Mahon, I do not think that Mr Dalton coloured the advice given to the Plaintiff. He clearly did not know all the circumstances.
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35. Whatever Mr Lucey told Mr Dalton was not explored. His recollection of not taking an attendance of a once-off half-hour visit does not make the rest of his recollection improbable or unreliable. Part of the gravamen of the Plaintiff’s case is that the advice stated to have been given was not of such a quality as to fully inform the Plaintiff, as the solicitors themselves were not fully informed. I am satisfied that Mr Lucey himself was fully informed. Mr Dalton was fully informed within his remit. But I am equally satisfied that the situation is not to be discounted because there is no note or memorandum (to satisfy the Statute of Frauds!). I know that that is drawing the analogy a bit too far but I do take on board what Mr Maguire said. It is certainly desirable that there should be a fuller note than exists in this case.
36. In that regard I must make a judgment of the witnesses – their integrity, sense of togetherness, sense of directness and their understanding and demeanour. I am satisfied that all three solicitors gave their evidence truthfully, fully and unequivocally and did advise as they stated. I do not think it is necessary to have attendances to corroborate what they said they would have done. It is certainly desirable to have an attendance but it is not a mandatory requirement. If one of these solicitors had died, there might be grave difficulty in certain circumstances without a contemporaneous note.
37. While it is true that in 1991 and in 1994 the position of the Plaintiff may have been vulnerable, he showed himself to be determined and resilient. Without commenting on his intended return to his home in Kinnitty, he showed the signs of a man who was not readily put down. As a businessman, I am satisfied that the Plaintiff made his decisions
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in circumstances where he considered them correct and appropriate and that they were of his own volition.
38. In the circumstances I do not think I need comment on the Defendant’s submissions as they seem to have been borne out by the facts that emerged during the evidence.
O’ Siodhachain v. O’ Mahony
[2002] IEHC 107 (31 October 2002)
JUDGMENT of Mr. Justice Kearns delivered the 31st day of October, 2002.
1. This sorry saga has its origins in the desire of the defendants to sell all or portion of farmlands jointly owned by them and comprising about 70 acres at Ballybeg, Co. Kerry. The farm contains a dwelling house, a number of outhouses and sheds, various fields and is also in part bog land. The events giving rise to the present dispute between the parties arose following an unsuccessful public auction to sell the farm which took place on the 14th day of August 1998.
2. The defendants are a married couple with two young children who married in 1988. The first named defendant was born in or around 1966 and his background was in farming. He left school at 16 years of age. The farm had previously been in the ownership of Sean O’Mahony’s family, but had been transferred to the defendants, subject to a right of residence in favour of Sean O’Mahony’s parents. Prior to the auction in 1998 arrangements had been agreed between the defendants and the O’Mahony parents whereunder the O’Mahony parents would waive their right of residence if the farmhouse was sold, subject to being relocated at the defendants expense.
3. Following their marriage, the defendants had initially lived in the O’Mahony farmhouse at Ballybeg, but in 1992 moved to the nearby village of Gneeveguilla, where, up to and including the time of the auction, they lived in what had formerly been Geraldine O’Mahony’s family home, which in addition had a small grocery shop and a number of petrol pumps.
4. Sean O’Mahony had been involved in a road traffic accident in 1983, following which he found it difficult to carry out farming work on the farm at Ballybeg. He also had some visual disability. In 1998, he and his wife were keen to sell off the farm and to move out of the area altogether. It was their intention at the time to place the proceeds of sale of the farm in an investment property in Dublin.
5. At the auction, the property was offered in different parcels, but neither the farm as a whole or the different parcels attracted any offers or any worthwhile interest. Later that evening, however, and without prior appointment, the plaintiffs arrived at the farmhouse and there spoke with Sean O’Mahony’s father, indicating some degree of interest in the property. On that occasion, Mr. O’Mahony Snr. showed the plaintiffs around the farmhouse, and the yard and outhouses. A phone call was made to the defendants at Gneeveguilla to inform them that the plaintiffs were on the property and some days later the first meeting between the plaintiffs and the defendants took place.
6. The plaintiffs jointly operate as Paralegal Technical Allied Services, which was set up in the mid 1990s to provide assistance to people with legal difficulties. The services consist not merely of giving assistance in getting litigation organised and assembling paper work for that purpose, but in counselling clients and providing assistance to people and families with social or other problems. The evidence in the case indicates that during the period from August 1998 to March 2001, the plaintiffs were involved in investigative work in Donegal, were assisting various litigants in court cases both in Dublin and at different country locations and were also engaged in litigation on their own account.
7. Apart from his paralegal and litigation activities, the first named plaintiff is a political activist and author and producer of cultural and other works. He is a well known figure in the Kerry area.
8. The second named plaintiff was born and educated in Scotland and obtained a BA Honours degree in Paisley. She read for an MA in England. She qualified as a secondary school teacher and came to Ireland in 1982 where she did a FÁS retraining programme in UCC. Thereafter she worked with AnCO, teaching people how to set up in business. She became interested in legal work following the breakdown of her marriage in 1986 which led to frequent court appearances for which she could not get legal aid. She started a BCL course in UCC in 1998 and was conferred with a BCL degree in September 2001. She completed her LLB studies in September of 2001 and sat entrance examinations for the Law Society in April/May, 2002.
9. In August 1998, the plaintiffs were living in rented accommodation in Scartaglen, Co. Kerry, a property which they had to vacate by April of the following year. Mrs. Herron was also the owner of a terraced house at Sunday’s Well in Cork, which had been vacant for a number of years and which was owned subject to a mortgage in favour of Cork Corporation. There are also other burdens affecting this property to which I shall later refer.
10. While Mr. Ó Siodhachain was distantly related to Sean O’Mahony, and while Mr. O’Mahony knew of Mr. Ó Siodhachain by reputation, the parties were not directly or previously acquainted until they first met some days after the abortive auction.
11. As much of the subsequent events, and in particular the intent and motivation of the parties, is hotly contested, I propose at this stage to confine myself to a narrative of the matters which are common case and deal with the conflicts in the course of my review of the evidence given by the witnesses.
12. In the days and weeks following the auction, it is not in dispute that the plaintiffs called to the defendants’ shop at Gneeveguila where discussions of a general nature took place about the possible sale of portion of the farm to the plaintiffs. The plaintiffs interest was mainly focused on the farm house, its curtilage and outhouses, and a number of adjoining fields, which together formed a parcel of about 40 acres.
13. The plaintiffs took the view at a very early stage that the O’Mahony’s were a dysfunctional family, and that Sean O’Mahony in particular was very much dominated by his parents, who very quickly appeared to have formed a dislike of the plaintiffs and were extremely unhappy at the prospect of the defendants selling the farmhouse to the plaintiffs. Mr. Ó Siodhachain encouraged Mrs. O’Mahony to develop more independence on her own account and gave her books on practical philosophy and psychology to assist her in this regard. He encouraged her to attend a course in philosophy in Killarney, which she duly did. Mrs. Herron for her part formed a friendship with Geraldine O’Mahony and the two women commenced confiding in each other.
14. As the relationship between the parties developed, the plaintiffs offered their expertise to the defendants in relation to what might be done with the proceeds of sale of the farm at Ballybeg. At different times, the plaintiffs brought the defendants to view properties as far away from each other as Athlone and Tarbert. Projections and drawings were prepared and supplied by the plaintiffs, such as might put the plaintiffs in the best possible position to apply for loan facilities from a lending institution. Amongst the various proposals under consideration at different times were the extension of the shop premises at Gneeveguilla, the opening of a business in Tarbert and a supermarket project in Rathmore, Co. Kerry, which latter option the defendants ultimately opted to pursue in 2000. Apart from one set of drawings, for which a sum of £200 was paid to Mr. Ó Siodhachain, these services were rendered as a “gift” by the plaintiffs to the defendants.
15. Again, it is not in dispute that the plaintiffs took a very pro-active role in the defendants lives. Nor is it in dispute that Mr. Ó Siodhachain advised and arranged for Mr. O’Mahony to seek and obtain psychological help and counselling to help him overcome problems identified by the plaintiffs. In particular, Mr. Ó Siodhachain recommended that Mr. O’Mahony consult with Dr. Kinsch in Tralee, advice which was taken by Sean O’Mahony. It appears that a number of counselling sessions did take place in late 1998 or early 1999, following which Dr. Kinsch paid a visit to the defendants home at Gneeveguilla for further consultation and discussion with both defendants.
16. Shortly before Christmas, 1998, the defendants spent an evening with the plaintiffs at Scartaglen where a discussion took place about the viability of purchasing a property for letting purposes by creating apartments. It appears to have been on this particular occasion that Mr. Ó Siodhachain produced figures and projections in relation to Mrs. Herron’s property in Cork, which suggested that that property, if renovated and set in flats, might produce a better income then some of the other options under consideration, including the investment property in Dublin. The Sunday’s Well property was close to UCC and thus suitable for students.
17. Following this discussion, Mr. O’Mahony, apparently on his own initiative, went to inspect the property in Cork as did his wife. A number of visits to Sunday’s Well took place, but no surveyor, architect or engineer was ever retained on behalf of the defendants for the purpose of assessing what renovations might be necessary to the Sunday’s Well property or the likely cost of same. Nonetheless, the defendants, and in particular Mrs. O’Mahony, were enthusiastic about pursuing further the idea of acquiring the Cork property, which in turn led to discussions between the parties of a “back to back” arrangement whereby the property in Cork might be transferred to the O’Mahonys in exchange for the defendants 40 acre parcel of land at Ballybeg, including the dwelling house, subject to some allowance for renovations to the Cork property..
18. Lengthy discussions then ensued between, in particular, Mr. Ó Siodhachain and Mr. O’Mahony, to see if mutually satisfactory terms could be arrived at. These discussions also involved what use Mr. O’Mahony would make of the lands at Ballybeg even if transferred to the plaintiffs, and there were also lengthy discussions about machinery, use of outhouses and a penumbra of related issues.
19. On the 10th April 1999, the plaintiffs wrote to the defendants to say that unless the proposed purchase of Ballybeg was completed within 14 days, the plaintiffs would be obliged to rent accommodation elsewhere (their time at Scartaglen having expired) and would hold the O’Mahonys to account for any rent which they might incur in so doing.
20. There then followed an all night discussion between the parties at Gneeveguilla on the 23rd April 1999 which led directly to the execution of the written document which is the subject matter of these proceedings and which is hereinafter referred to as “the first contract”. This document was drawn up and prepared by the plaintiffs. It is not in dispute that the defendants obtained no independent legal advice prior to executing the same.
21. Under the first contract, the defendants agreed to purchase the plaintiffs property at Sunday’s Well in Cork and the plaintiffs agreed to purchase the farmhouse, outbuildings and about 40 acres of land, the property of the defendants at Ballybeg. The purchase price for the Sunday’s Well property was £374,000 and the purchase price for the lands at Ballybeg was £214,000. In addition, the defendants were to get the benefit of a sum of £95,000 to be spent on renovations on the Sunday’s Well property. The document further provided that purchase and sales contracts should be signed and exchanged as soon as practicable but in any event not later than the 8th December 1999.
22. In view of the dispute which subsequently arose between the parties, it is appropriate to set out verbatim those provisions of the document which related to the use and occupation of the lands at Ballybeg prior to the completion of any contract for sale. Firstly, the “preamble” to the document recites the following:
This document is to set out the terms and conditions as agreed between all parties on Saturday April 23, 1999 at Gneeveguilla, Rathmore regarding the sale and transfer of properties between both parties and such interim arrangements as are required to allow all parties the use and benefit of the properties and security for their interests in same prior to the signing of the sales and purchase contracts on or before the 8th December 1999, at which time this agreement will cease to have effect.”
23. The document later provided:
10. “to facilitate the renovation work in Sunday’s Well and to protect the interest of the purchasers and the moneys expended in the reconstruction, the vendors as set out in (1) of the foregoing will lease to the purchasers as set out in (2) of the foregoing the property in Sunday’s Well for a 15 year period.
11. To facilitate the occupation and renovation of Ballybeg the vendors as set out in (2) of the foregoing will lease the property as set out in (4) of the foregoing to the parties as set out in (1) of the foregoing.
12. The 15 year leases as set out in (10) and (11) of the foregoing will come into effect with the signing of this agreement and will remain in force until superseded by the contracts as set out in the preamble.
13. It is agreed by all parties that the contracts for the sale and purchase of Sunday’s Well in Ballybeg properties be exchanged between the parties solicitors as soon as the renovations of the main residence of Sunday’s Well is complete or in any event not later than 8th December 1999.
17. Both parties agreed that this document will cease to have effect on the signing of the contract for both properties on or before the 8th December 1999.”
24. Following the execution of this document, the first named defendants’ parents were prevailed upon to vacate the dwelling house and move into rented accommodation. The plaintiffs moved into occupation of the defendants’ farmhouse in May 1999 and have remained there since. They have paid neither rent nor purchase moneys to the defendants.
25. In the months that followed, no work by way of renovations to Sunday’s Well was carried out, nor was any schedule of works prepared or agreed, nor was any expert or qualified professional retained to advise the defendants in any way in relation to Sunday’s Well.
26. In November 1999 the defendants asked the plaintiffs to be relieved of their obligation to proceed with the transaction insofar as the acquisition of the Sunday’s Well property was concerned. The plaintiffs agreed to this request. Without objection from the defendants, the plaintiffs continued to reside at Ballybeg. No renovations or works were carried out at Ballybeg.
27. In February, 2000, the defendants instructed their solicitor, Mr. Terence Casey, to prepare a contract for the sale of the farm at Ballybeg to the plaintiffs to the sum of £214,000. It was the agreed background position between the parties that a £1,000 deposit would be sufficient, it being recognised that the plaintiffs were not in a position to offer more at that particular time. The contracts were duly sent out and returned with a draft for £1000. This contract is hereinafter referred to as “the second contract”. This contract provided for a closing date some six months from the 11th February 2000. When on the return of the contracts signed by the plaintiffs Mr. Casey noted that a deposit of only £1,000 had been paid with a six month closing period he advised the defendants against proceeding further. For that reason that sale did not proceed and that document is not of itself an issue in these proceedings.
28. Throughout 2000, the plaintiffs made efforts both in Ireland and in the United Kingdom to raise the necessary funds to purchase the defendants’ farm. The defendants for their part remained willing to sell the farm to the plaintiffs, notwithstanding the history to that point. By mid 2000, the defendants had opted to purchase a supermarket premises in Rathmore and were themselves coming under increasing financial pressure to marshal the necessary funds both for the acquisition of the property and for the setting up of the business in Rathmore. The unchallenged evidence of Mr. O’Mahony was that the defendants paid the sum of £260,000 for the shop in Rathmore in which context they applied for and obtained loan advances of 220% of the purchase price from Anglo Irish Bank to buy, stock, and fit out the supermarket for business purposes.
29. Following this acquisition, the defendants instructed Mr. Casey to draw up another contract for the sale of Ballybeg to the plaintiffs (hereinafter referred to as the “third contract”). In this contract the purchase price for the defendants property is stated to be £220,000 with a deposit of £22,000 payable by the plaintiffs. This contract provided that the sale should be closed on or before the 15th March 2001. It further provided that the contract would not be binding on the vendors until such time as it was signed by them and that no contract for sale should be otherwise construed.
30. This contract was in turn sent back in amended form to Mr. Casey through the plaintiffs’ solicitors with a deposit of £100. Mr. Casey called the defendants into his office and advised them strongly against entering into the contract. While the second named defendant was keen to proceed, Mr. Casey said he would not act for the defendants if they insisted on going ahead. It is not in dispute that executed contracts were never returned to the plaintiff’s solicitor.
31. In early March, 2001, the plaintiffs called, without the knowledge of the defendants, to Mr. Casey’s office in Killarney. They sought an extension of the closing date in the third contract from the 15th March, 2001 for at least one month as they believed they could still sell the Cork property. Mr. Casey, who only agreed to the discussion on an “off the record” basis, felt a longer period of time would be required if no purchaser was immediately available, and there was no such purchaser, and invited the plaintiffs through their solicitor to write to him requesting an extension of time. It is not in dispute that at the particular meeting, the plaintiffs offered to waive their entitlement to enforce any claim they might have to the 40 acre farm if they got the dwelling house and yard. Following this meeting, Mr. Casey received a letter from the plaintiff’s solicitor and called his clients in for a meeting.
32. In the course of his discussions with his clients, he voiced his suspicions as to whether or not the plaintiffs were in a position to sell the property in Cork. He advised his clients to seek possession of their farm at Ballybeg and to move to eject the plaintiffs.
33. A notice to quit dated the 5th April, 2001 was served on the plaintiffs requiring them to deliver up possession on or before the 13th April, 2001.
34. District Court ejectment proceedings were commenced on the 30th April, 2001.
The proceedings and the issues
35. The present proceedings were commenced by Plenary Summons issued on the 29th August 2001.
36. In these proceedings, the plaintiffs claimed an injunction prohibiting the defendants from proceeding with the ejectment proceedings pending the determination of the present proceedings. An interlocutory injunction was also sought to restrain the first named defendant from harassing the plaintiffs or interfering with the Plaintiffs in their possession of the premises at Ballybeg pending the determination of the proceedings. The summons further sought a declaration that the document or agreement entered into by the plaintiffs and the defendant on the 28th April 1999 was a lawful and valid lease.
37. A statement of claim was delivered on the 5th September 2001, on which date the plaintiffs issued a Notice of Motion for an Interlocutory Injunction to restrain the first named defendant as hereinbefore stated.
38. A replying Affidavit of Sean O’Mahony was sworn on the 11th September 2001, following which Donal Ó Siodhachain swore an affidavit on the 26th September 2001, to which was added a supplementary affidavit of Patricia Herron on the 1st October 2001.
39. The matter came before this Court on the 22nd October, 2001 when the controversy between the parties was outlined in some detail. I decided that, in the interest of having all matters disposed of at the same time, to injunct the continuance of the District Court proceedings and to set rigid timetables for pleadings and discovery so as to facilitate the earliest possible plenary hearing of all issues.
40. Thereafter a defence and counterclaim were delivered on the 12th November 2001.
41. Before that time, Mr. Terence Casey, who had been named in the proceedings as a third named defendant, successfully brought an application before Murphy J. on the 2nd October 2001 for an order striking out the proceedings against him. This order was the subject matter of an appeal to the Supreme Court which dismissed the appeal of Mr. Ó Siodhachain and Mrs. Herron on the 6th December 2001.
42. Affidavits of discovery were sworn by Mrs. Herron and by Sean O’Mahony, including a supplemental affidavit of discovery sworn by Mrs. Herron on the 31st May, 2002.
43. On the 10th May, 2002, Mrs. Herron brought a further Motion for Discovery seeking further and better discovery as per her letter to Mr. Casey dated 13th March 2002. While this matter had been adjourned in the Master’s Court to a date subsequent to the commencement of the hearing before this Court, the same was dealt with during the course of the hearing before the Court as appears from the review of the evidence.
44. On the 10th May, 2002, the proceedings appeared in a list to fix dates before Kelly J. Having heard Mrs. Herron on that occasion, Kelly J. directed that the proceedings be listed for hearing on Tuesday the 18th June 2002. The plaintiffs appealed the order of Kelly J. to the Supreme Court.
45. On the 18th June 2002 when the matter was listed before Kelly J., the plaintiffs again unsuccessfully applied to adjourn the matter and the plaintiffs then immediately moved an application in the Supreme Court by way of appeal, from the order of Kelly, J., which said application was refused by the Supreme Court.
46. The application for adjournment was renewed to this Court on the 18th June and was also refused.
47. Further applications for adjournments were made by the plaintiffs to this Court during the hearing of the proceedings before this Court. One application which was premised on a medical indisposition affecting Mrs. Herron was granted. Further adjournment applications, sought for the purpose of initiating proceedings against me as the trial Judge in the case, together with other defendants, was refused.
48. As appears from the Affidavit of Patricia Herron sworn herein on the 10th May 2002, the case had been put in to the list to fix dates first on the 11th January, 2002. At that time, it was put back to the next list to fix dates in March, 2002 when Mrs. Herron indicated to the Court that a date for hearing in April or May would not suit her as she had law exams during those months. As already stated, Mrs. Herron, notwithstanding this adjournment, sought the further adjournment refused by Kelly J. on the 10th May, 2002. As is acknowledged by Mrs. Herron in her Affidavit, the time limits specified by me when injuncting the continuance of the District Court proceedings included the requirement that the case should go into the list of fix dates in January 2002.
49. During the course of the hearing, I invited the parties to identify the real issues in the case. As appears from the Statement of Claim delivered by the plaintiffs, certain reliefs sought are in contradiction of each other. In the course of submissions, Mrs. Herron indicated to the Court that the plaintiffs were not placing any form of reliance on the second contract. They were however asserting their right to occupy and remain in occupation of the defendants’ farmhouse and lands at Ballybeg under and by virtue of the document dated 28th April, 1999, as varied by an alleged oral agreement between the parties made thereto when the defendants withdrew from the purchase of the Sunday’s Well property. In the alternative, the plaintiffs contended that a concluded and valid contract was made between the parties in October 2000.
50. Taking in to account the defence and counterclaim delivered in the case, the issues to be determined are as follows:-
(a) Is the document dated 28th April, 1999, effective to create a valid lease for the stated period of fifteen years or otherwise?
(b) If so, was the execution of the document in question procured by undue influence, or was the making of the agreement attended by circumstances of oppression or unfairness which would require the Court to intervene to set it aside?
(c) Was there a concluded and valid contract made between the parties in respect of the lands at Ballybeg in September/October 2000?
(d) Are the defendants entitled to an Order for possession of the farmhouse and lands at Ballybeg?
The Evidence
51. The execution of the first contract not being in dispute, the Court ruled that the defendants should first give evidence in support of their contention that the making of the first contract was procured by undue influence or was otherwise attended by circumstances of oppression or unfairness which would warrant the intervention of the Court.
52. In reviewing the evidence, the Court will not again refer to those undisputed matters and events already outlined which were established in the course of the evidence, but will rather concentrate on those areas where conflicting evidence was given.
53. Sean O’Mahony told the Court that in 1998 the defendants had decided to sell their 70 acre farm with a view to raising money for investment purpose. He also had in mind moving out of the area altogether.
54. He only knew Mr. Ó Siodhachain by repute although he accepted there was a family connection. From the outset, Mr. O’Mahony felt the plaintiffs were trying to win over the trust of his wife and himself and from an early stage, he said, the plaintiffs virtually lived with them on a constant basis, offering all sorts of services, including the preparation of financial projections and plans for various business ideas in which they sought to interest the O’Mahonys. Mr. O’Mahony informed the Court that he was led to believe that the plaintiffs could do any legal work in respect of any sale of the property for nothing if the property was sold to them.
55. After a while, aspects of the relationship with the plaintiffs began to disturb Mr. O’Mahony. He felt they were driving a wedge between himself and his wife, saying, for example, that Sean should be operating the pumps outside the shop operated by his wife at Gneeveguilla, rather than sitting around while his wife did such work. The plaintiffs, according to Mr. O’Mahony, suggested openly that Sean was very manipulated by his parents.
56. Mrs. Herron suggested to Mr. O’Mahony that there were unhappy differences between Mr. O’Mahony and his wife which had led in 1992 to Geraldine leaving their home in Ballybeg without him to go back to her family home at Gneeveguilla with her baby. Mr. O’Mahony stated that they had both gone to Geraldine’s family home with their child in 1992 because her father was extremely ill at the time and required care and support. He did however accept that part of the reason was that Geraldine did not get on too well with his parents. Mrs. Herron pressed Mr. O’Mahony to accept that he was a person prone to depression, that he spent days on end in bed, both before and after the time when she and her co-plaintiff met with him. Mr. O’Mahony agreed that his parents interference did get him down at times, but not to the point where he ever needed to spend time in bed or require medical or psychiatric help. He accepted suggestions from Mrs. Herron that his parents demanded to know the reason on every occasion where Sean sought to use the family car and required him to account for the mileage.
57. Mr. O’Mahony stated that he had received psychiatric counselling from Dr. Matt Kinsch in Tralee some months after first meeting the plaintiffs. This was Mr. Ó Siodhachain’s idea. He had also seen some other counsellor whose name he could not recall. The psychiatric advice he had received was to have no further dealings with Mr. Ó Siodhachain.
58. He was challenged on his assertion that the plaintiffs “lived” with the O’Mahonys, that the plaintiffs were away a lot of the time on other unrelated business. Mr. O’Mahony agreed that this was so, but pointed out that he and his wife had travelled to Donegal with the plaintiffs and visited a number of properties with them.
59. Mr. O’Mahony stated that some months after first meeting with the plaintiffs, they indicated they had a property in Cork that might be a more suitable alternative investment opportunity. He wasn’t interested, but felt his wife Geraldine was very much won over. Some time after Christmas 1998 he went to look at the property which was located in Sundays Well in Cork. He felt it was in a very poor condition having been vacant for a long time. He said that Mr. Ó Siodhachain had suggested swapping the farm at Ballybeg for the plaintiffs property in Cork, subject to some allowance for renovations to the Cork property. This was with a view to making the Cork property fit for letting in flats. Mr. O’Mahony told the Court that he wished to have an accountant, engineer and solicitor look at the proposal, but the plaintiffs, having initially agreed to this approach, changed their minds and suggested instead that they would put the O’Mahonys in touch with solicitors of their nomination. In the event no surveyor, architect or engineer ever looked at the property on their behalf.
60. Mr. O’Mahony went on to describe the events which took place in the dwellinghouse at Gneeveguilla on the night of the 23rd April 1999. On that night, he said that without prior arrangement the plaintiffs called and the parties then sat up all night discussing the proposed deal to be made. His recollection of the leasing arrangement was to the effect that Mr. Ó Siodhachain had mentioned a 99 year lease as being effective as a means of avoiding tax. There had been no mention of any rent in respect of leases on either property. However, when the plaintiffs later that same day came back with a written document in which there was reference to a 15 year lease he asked about it and was told not to worry, that it was for “tax purposes” only. He told his own counsel that it was his understanding that if contracts were not exchanged by the 8th of December 1999, then the whole transaction would fall through. He also said that Mr. Ó Siodhachain had often said to him that the document wasn’t worth the paper it was written on. He did not accept in cross examination that the document was only signed by the parties on the 28th of April 1999. He further stated that when it was signed on Sunday 24th, he was told by the plaintiffs not to discuss the document either with Mr. Casey, the O’Mahonys solicitor, or anyone else. He denied that the document had been left with himself and his wife for some days for their careful consideration or that they had been advised to discuss the entire matter with his solicitor, or some other solicitor.
61. The first written version of the document was seen by him on Sunday evening. It was then when he signed it and he recalled changing the figure in respect of renovations on the Cork property from £75,000 to £95,000.
62. When the document had been executed, he arranged for his parents to move out of the dwellinghouse to rented accommodation. Under the new arrangements worked out with the plaintiffs, he retained use of certain outhouses and a workshop on the lands. Mr. Ó Siodhachain worked some of the fields, cutting and baling hay which, according to Mr.O’Mahony, was left in the fields and needed to be removed by Mr. O’Mahony. Later by agreement, Mr. O’Mahony, let the fields and the plaintiffs occupation of the disputed property was confined to the house and surrounding curtilage.
63. Before the year was out, Mr. O’Mahony told the Court that his wife and he had decided they no longer wished to proceed with the purchase of the Cork property, because they wished to purchase a supermarket in Rathmore. The plaintiffs had no objection to their withdrawal, because at that time no renovations had been carried out to the Cork property and Mr. Ó Siodhachain said that the Cork property was now more valuable than it had been at the time of the execution of the document in April 1999.
64. Despite the fact that the original transaction was now at an end as far as Mr. O’Mahony was concerned, he nonetheless went to see his solicitor, Terence Casey, in January or February 2000 to get him to draw up a contract for the sale of the farm at Ballybeg to the plaintiffs for the sum of £214,000. He told the Court he did not inform Mr. Casey about the document which had been executed in April 1999. However, at another point in his evidence he stated that he may have mentioned the April 1999 document before December of that year when Mr. Casey asked for details of the title to the Sundays Well property. In any event, the second contract fell through when Mr. Casey advised against proceeding further.
65. In the year 2000, Mr. O’Mahony stated that he and his wife were keen to purchase a supermarket premises in Rathmore. They were still willing to sell to the plaintiffs, who kept promising they would come up with the money. They were dealing with Anglo Irish Bank in relation to the financial arrangements for the acquisition in Rathmore. He borrowed 220% of the purchase price of £260,000 for the property. This involved monthly repayments to the bank of £5,000 – £6,000 which was a huge financial burden for them. It was at this time that the third contract came into being. Mr. O’Mahony accepted that before it was drawn up he and his wife had first asked the plaintiffs for a letter of intent to purchase the farm at Ballybeg in the hope that the letter might be sufficient to persuade some financial institution to advance money. However, Anglo Irish Bank was not content to accept the letter. The third contract was then issued by Mr. Casey at the defendants suggestion. This provided for an additional £6,000 to the purchase price which, according to Mr. O’Mahony, was to reflect the increase in value in the farm, and had nothing to do with rent for use or occupation, as was suggested to him by Mrs. Herron. He denied that he had signed or executed this document, or that it was used by way of collateral or security for the Anglo Irish advance. Mr. O’Mahony stated that, apart from the supermarket title itself, various sites on his farm had been offered as collateral to Anglo Irish. The purchase of the supermarket and the move to Rathmore took place in November 2000.
66. Mr. O’Mahony said he was aware that in March 2001 the plaintiffs had gone directly to their solicitor with a view to extending the closing date on the third contract to the end of May. However, the problem was the plaintiffs were never able to come up with the necessary moneys to close. When the third contract came back with a deposit of only £100, Mr. Casey would not accept that they should proceed.
67. Mr. O’Mahony was also cross examined by Mr. Ó Siodhachain who suggested that Mr. O’Mahony had a great deal of experience in assessing building projects and dealing with tradesmen and other business people. Mr. O’Mahony agreed. Mr. Ó Siodhachain suggested that Mr. O’Mahony was perhaps not as incompetent or helpless as he had made out before the Court.
68. Geraldine O’Mahony told the Court that from the time of the first meeting with the plaintiffs that the plaintiffs virtually “lived with them” in Gneeveguilla. Mr. Ó Siodhachain was interested in buying the dwellinghouse on the farm and had all sorts of plans for extensions to the house which would accommodate his published works and legal cases. She described in some detail the months which led up to the all night meeting in April, 1999. In the talks which took place between the parties, Mr. Ó Siodhachain gave her to understand that she was been manipulated by her husband and that she had no control in the family unit. He also came up with the idea that Sean her husband should go for counselling. There was a first counsellor and then Dr. Kinsch, both of whom were nominated by Mr. Ó Siodhachain. She was asked if she had told Mr. Ó Siodhachain that Dr. Kinsch had advised her husband to “grow up”. Mrs. O’Mahony stated that the advice given to her by Dr. Kinch was that her husband should side more with his wife, even though he was an only son. She added that Dr. Kinsch had also advised that the O’Mahonys should altogether eliminate the plaintiffs from their lives.
69. She told the court that Mr. Ó Siodhachain had advised her to, “wake herself up”. She said that Mr. Ó Siodhachain advised her that both he and Mrs. Herron had come into their lives as “a sign from God” that they were there to help them. Mr. Ó Siodhachain led her to believe that if she did as he urged, everything would be fine in their lives. She believed everything he said and the extent to which Mr. Ó Siodhachain’s advice was followed caused a rift between her and her husband which was a mistake she would regret for the rest of her life. Mr. Ó Siodhachain pressed the witness about the visit paid by Dr. Kinch to the O’Mahony family home. Mrs. O’Mahony stated that the plaintiffs had in advance listed questions for her to put to Dr. Kinch about her husband, but denied the suggestion that, in the aftermath, of the visit, she told Mr. Ó Siodhachain that her husband had been left with “no cover” and would have to do whatever was suggested of him at that stage.
70. Both plaintiffs challenged Mrs. O’Mahony on her assertion that they virtually “lived” with the O’Mahonys. It was put to the witness that Mr. Ó Siodhachain and Mrs. Herron were either in Dublin for litigation purposes or in Donegal during the months in question between the auction and the signing up of the first contract in April, 1999. It was also put to the witness that Mr. Ó Siodhachain was busy during these months in political activity on behalf of Martin Ferris of Sinn Fein in Kerry. Mrs. O’Mahony accepted that the plaintiffs were actively involved in these different ways, but they still found lots of time to be calling on the O’Mahonys. She gave an example of how this might operate. On occasions where Mr. Ó Siodhachain might be in Dublin for one of his court cases, he could still call to the shop later on the same day. He often came with stories of court cases which he felt were designed to put the fear of the law into herself and her husband so that they would be afraid to such a degree that they could never stand up in court against the plaintiffs. She told the Court that Mr. Ó Siodhachain claimed to her that he could control the Court process by getting cases adjourned again and again and that he could “put a judge in his place”. As his cases were so often adjourned in this way, he could be back in Mallow by train in the afternoon, following which he would turn up at the defendants home.
71. In relation to the first contract, Mrs. O’Mahony recalled a particular evening in April 1999 when the all night discussions took place. On this occasion, the plaintiffs arrived without prior arrangement and were very business-like and brisk. Contracts were produced, she said, “out of the blue”. Although there had been much talk of selling the farm, neither she or her husband were ready for this and both stated that they needed their solicitors advice and that they would not sign without it. However, the discussions went on all night and the contracts were eventually signed, as far as she was concerned, at 6 o’clock on Sunday morning. Again, as far as Mrs. O’Mahony was concerned, the contracts, whether in draft or typewritten form were not left with herself or her husband for even one day.
72. She told the Court that later that year, following a consultation with their accountant in Killarney, the O’Mahonys decided not to buy the property in Sundays Well. She continued to hope that the plaintiffs would come up with the necessary funds to buy the farm at Ballybeg by selling Sundays Well themselves. In the meantime, the plaintiffs kept coming up with new plans and projects for the O’Mahonys as suitable investment vehicles for the proceeds of any sale. Some of these plans and projections were drawn up by way of gift, others she paid for at £200 a time. At one point, she said, Mr. Ó Siodhachain wanted 1% of the overall figure if moneys were advanced from the bank in respect of the supermarket project at Rathmore.
73. In relation to the second contract, Mrs. O’Mahony stated she had already given cash to Mrs. Herron, out of which she believed the £1,000 deposit was paid. She had advanced moneys to Mrs. Herron, because she believed the plaintiffs did not have any money at that particular point in time.
74. When the opportunity to buy the supermarket in Rathmore came up in 2000, she was still of the view that she would give the plaintiffs a chance to come up with the money to buy the farm at Ballybeg. This was the reason why the third contract was sent out in October 2000. At this point, Mrs. O’Mahony told the Court, that she and her husband were desperate for money, that they were being pressed by suppliers and banks, all calling for payment.
75. Asked why she would give £1,000 towards a deposit to purchase her own property, Mrs. O’Mahony stated that in fact over the term of her acquaintance with Mrs. Herron between 1998 – 2000, she had in fact given to Mrs. Herron sums of money amounting to about £30,000.
76. Despite the collapse of the second contract, Mrs. O’Mahony told the court she still wanted to give the plaintiffs a chance to come up with the money even though she had begun to distance herself from the plaintiffs because of her worries about their difficulty in completing the purchase. She accepted the third contract came into being because Anglo Irish Bank would not accept a letter of intent to purchase the farmhouse from the plaintiffs. The bank required a signed contract. She did not recall any discussion about the amount of the deposit on this occasion. Her belief was that the contract specified a 10% deposit, something around £22,000. She denied that she had agreed that a deposit of £100 would suffice. She equally confirmed that she did not sign the third contract, that Mr. Casey would not permit it. This document was never produced or offered to Anglo Irish Bank by way of security. Instead, other sites from the O’Mahony farm were provided, along with the title deeds to the supermarket premises in Rathmore, as security for the loan which was advanced. Mrs. O’Mahony further stated that she had informed Mrs. Herron that the third contract had not in fact been signed by the O’Mahonys, although she kept hoping the plaintiffs might find the money to complete the transaction. Mr. Ó Siodhachain had told her they hoped to get it from England. However, from the time they moved to Rathmore in November, her husband had been pressing Mr. Ó Siodhachain for the purchase moneys all to no avail. When the third contract fell through, Mr. Casey was only then informed about the document executed in April 1999.
77. It was put to Mrs. O’Mahony that the ejectment proceedings only began when Mr. Ó Siodhachain wrote a letter threatening legal proceedings to injunct her husband from threatening behaviour and conduct. The witness disagreed, although confirming they had received such a letter. She did not accept that her husband regularly fought with tradesmen and staff in their supermarket, or that he had a problem dealing with people. She accepted the suggestion put to her that her husband was not intellectually incapacitated in anyway.
78. Mr. Casey told the Court that he was the defendants solicitor. Some weeks after the auction he heard that people wanted to buy the farmhouse. In February 2000 he was told by the O’Mahonys to draw up a contract for sale. He was advised at that time that the purchasers might not be able to pay the full deposit, so when drawing up the contract, he inserted the purchase price of £214,000 but left the amount of the deposit blank.
79. The contracts came back with a draft for £1,000 from the plaintiff’s solicitor Mr. Enright. Because there was a six month closing date and because the deposit was so small, he felt it was very unwise for the O’Mahonys to enter into contracts and so advised them. They took that advice. He later received a letter from the plaintiff’s solicitor stating that his clients were not now entering contracts and to return the deposit which he did.
80. He had a number of calls from the O’Mahonys saying that the plaintiffs were still keen on buying and had a property in Cork to sell. Through his clients, he passed on request for inspection of the title to the Cork property. He himself was sceptical that the plaintiffs had a property to sell. He was never shown or furnished with the title to the Cork property.
81. He was asked in October 2000 by Geraldine O’Mahony to draw up a further contract, that Mrs. O’Mahony believed that the property in Cork could be sold and so they wanted to go ahead. He was aware that the O’Mahonys were under pressure for money having just bought the premises in Rathmore, a transaction in which he was involved as their solicitor.
82. He drew up this further contract, which had a purchase price of £220,000 and 10% deposit.
83. He later received a telephone call from the plaintiff’s solicitor saying that the deposit was too high and asking if it could it be reduced. He said it could within reason. The contracts came back in amended form with a draft for £100. He called the clients into the office and told them he could not have it on his conscience to allow them enter into these contracts. Mrs. O’Mahony was keen to proceed. He said he would not act. At this point, Mrs. O’Mahony realised how serious the situation was, so they left his office without signing and never did sign. The contracts he said, never left his office, nor were they ever used as security for financial loans.
84. This occurred in early March.
85. Very shortly afterwards, the plaintiffs called to his office without appointment. Mr. O’Siodhachain wanted an “off the record” discussion. The plaintiffs wanted an extension of the closing date from the 15th of March, 2001 for one month, as they believed they could sell the Cork property. He asked if they had a purchaser. They had not. He said that if the property could be sold within two months he would ask the O’Mahonys for an extension.
86. He then got a letter from the plaintiff’s solicitor, Mr. Enright, looking for the extension. However, the letter was not reflective of the conversation he had had in the office with the plaintiffs in that it touched on matters relating to planning permission for the Sunday’s Well property which he had never discussed with Mr. Enright. He called the O’Mahonys in for a meeting and told them that he was suspicious as to whether or not the plaintiffs were making any effort to sell Cork.
87. In the course of this discussion he learned that his clients had entered some sort of arrangement and signed some document in April, 1999. He was completely unaware of this document until then. As soon as he saw it, he advised his clients to seek possession.
88. Cross examined as to whether the third contract was used as security for the loan obtained from Anglo Irish, Mr. Casey produced a letter from Anglo Irish Bank setting out the terms for the proposed advance. Mrs. Herron objected that this document had not been discovered. The Court then indicated that this was an appropriate juncture to deal with the Motion for further and better discovery which had been adjourned from the Master’s Court to the present hearing. Having heard submissions from both sides, the Court determined that the plaintiffs were entitled to further and better discovery such as would include production of this particular document. All other reliefs sought in the adjourned Motion for further and better discovery were refused.
89. He was asked about the meeting which had taken place in his office in March, 2001 attended by the plaintiffs. He was asked if he agreed that the plaintiffs offered to waive their entitlement to enforce their claim to the forty acre farm if they got the farmhouse and yard. Mr. Casey agreed that this suggestion had been made. He further agreed that he had not relayed this information back to its clients because of the confidential nature of the discussion. He had no authority, he said, to vary anything that might have been stated in the contract document.
90. He was asked if he had returned the £100 deposit and if not, why not? Mr. Casey replied that the draft in question remained uncashed on the file. He was asked if he had any recollection of the lease arrangement being discussed at this particular meeting and said he did not.
91. He did not think the O’Mahonys had kept the details of the first contract purposely from him. They told him when they did eventually produce it, that they had been told by the plaintiffs that it was “not worth the paper it was written on”.
92. He accepted that he had not addressed the queries about the title to the Cork premises to the plaintiffs or their solicitor. His concerns had been channelled through the O’Mahonys. His concerns first arose at the time of the second contract, not because of the disclosure of the April, 1999 document of which he then knew nothing, but because his clients kept telling him that the plaintiffs intended closing the sale out of the proceeds of sale of the property on Sundays Well. He wanted to know about the Cork property and subsequently found out that Cork Corporation had the title deeds. In searches which he made in May, 2001 he discovered there were three judgment mortgages affecting the property. The first of these was entered on the 21st of March, 1997 in proceedings between N.I.B. and Patricia Herron in the sum of £2,672. The second was entered on the 25th of April, 2000 in proceedings between A.I.B. and Patricia Herron in the sum of £9,100 and the third was entered or registered on the 26th of May, 2000 in proceedings again involving A.I.B. and Mrs. Herron, this time in the sum of £20,947. All included in addition sums for costs. The three judgment mortgages were registered on foot of judgments obtained against Mrs. Herron, the first in October, 1996 and the other two in November, 1999.
93. Mr. Casey was asked about the notice to quit and the procedures that had taken place at that time. As far as Mr. Casey was concerned, the notice to quit was served first, and then followed by a demand for possession. Asked why the notice the quit refers to a weekly tenancy, Mr. Casey said it was impossible to know from the first contract document what the basis of the plaintiff’s occupation of the farmhouse was, other than as permissive occupant. He assumed it was a week to week type of arrangement. He stressed that sites owned by the O’Mahonys were never put up as collateral for the sums advanced by Anglo Irish Bank, but that some of these sites were being sold to reduce the indebtness of the O’Mahonys to Anglo Irish Bank.
94. He could not recall whether at the meeting the plaintiffs had at one point offered to give up the house at Ballybeg within a reasonable period.
95. Mr. Ó Siodhachain gave evidence to the effect that he became aware of the possible sale of this farm from talk in the locality. On the night of the auction, he and Mrs. Herron went to the farmhouse and were shown over the farmhouse and yard by Sean O’Mahony’s father. He indicated he might be interested in the dwellinghouse and some of the old buildings. Some days later the plaintiffs met with the O’Mahonys. He only visited the farm at Ballybeg two or three times, although they did call to the defendants at their shop in Gneeveguilla. He insisted that a great deal of time was spent by both plaintiffs in Donegal and Dublin over the following months and he rejected suggestions that the plaintiffs virtually lived with the defendants.
96. He accepted a friendship and relationship did develop between the plaintiffs and the defendants. As part of the work he did with Mrs. Herron, he would get involved in counselling clients. In this instance, both he and Mrs. Herron had recognised there were grave problems affecting the O’Mahonys. Both were complaining about interference by in-laws. Mr. O’Mahony in particular was called to account for virtually everything he did by his parents and was being treated like a 15 year old. He formed the view that Sean’s behaviour was dysfunctional and immature and that he should see a counsellor. He recommended Dr. Kinsch to whom he had referred a number of other clients. He also recommended self help books to Geraldine and gave her guidance in relation to a course in practical philosophy, which she pursued as a result. He told Mr. Cross that the various interventions he had made in the O’Mahony’s lives were made for altruistic reasons. He accepted he had supplied the name of an accountancy firm to the O’Mahonys and also a particular branch of the Bank of Ireland. He also had advised and arranged for Mr. O’Mahony to see a particular Harley Street specialist in relation to his visual difficulties. He accepted he had also advised the O’Mahonys on how to furnish their home at Gneegevuilla so as to make the best possible impression on any representative of a lending institution that might call out to discuss business with the O’Mahonys.
97. He accepted that the plaintiffs had prepared background paper work, including financial projections, for a number of projects which they had discussed with the defendants. One night before Christmas 1998 the O’Mahonys came to their home in Scartaglen to discuss a particular project or property. On that particular evening, Mr. Ó Siodhachain by way of example and illustration as to how an investment property could yield profit, showed to Mr. O’Mahony some projections he had prepared in relation to Mrs. Herron’s house in Sunday’s Well to give the defendants some idea of what might be necessary when approaching a lending institution seeking finance. Some time later he found out that Sean O’Mahony had gone to Cork to look at the property from the outside and was very enthusiastic about it. Mrs. O’Mahony did likewise and both O’Mahonys came to the plaintiffs with a proposition that they would buy the Sunday’s Well property if the plaintiffs bought the farm.
98. In the months leading up to April 1999 discussions began on a back to back arrangement. These discussions took many weeks and at various times he wanted to be finished with the whole discussion because of Mr. O’Mahony’s attitude which kept stringing things out for weeks. Mr. Cross read to him the contents of a letter dated 10th April 1999, suggesting it contained a threat that unless the purchase of Ballybeg was completed within 14 days that the O’Mahonys would be held responsible for rented accommodation elsewhere should the plaintiffs move out of Scartaglen, together with other expenses which Mr. Ó Siodhachain might incur. Mr. Ó Siodhachain stated that Mrs. O’Mahony had asked for the particular letter so as to get her husband’s parents out of the dwellinghouse. They had dug in their heels after the auction and were now demanding a new house. Also, he said, Mrs. O’Mahony was getting hate mail locally. The letter was designed to bring that to an end, because it was something she could show around to her relatives to highlight the difficulty that the O’Mahonys would be in unless the deal went ahead. The only pressure applied arose from the fact that the plaintiffs had to vacate the property at Scartaglen.
99. Mr. Ó Siodhachain stated there were at least three longhand drafts of the first contract before the all night meeting at the end of April 1999. On that night, the plaintiffs brought the final draft in longhand with them. He told Mr. O’Mahony at the outset that things were going to be finalised that night or the matter would go no further. He agreed that discussions went on all night because they were discussing matters which were not dealt with in the document, such as plant and machinery and how various EC land schemes would affect the property.
100. The reference to a lease had been included in the draft and in the discussions, because he was aware from other work he had done that no bank or finance house would give money or grant a loan except on a 15 year lease. He denied that he ever said the document was not worth the paper it was written on, although his own solicitor, Mr. Enright, had told him later that he was not very happy with it.
101. Some days later a typed version of the document was presented to the O’Mahonys. Sean O’Mahony wanted to change the sum for renovations to the Cork property from £75,000 to £95,000. Mr. Ó Siodhachain agreed and offered this as the reason why the written amendment appears on the typed version of the document. The document was then left with the O’Mahonys for a few days. Mr. Ó Siodhachain told the Court that the plaintiffs urged the O’Mahonys to show it to Mr. Casey, but they did not want that. They then suggested to Mr. O’Mahony that he take it to some other solicitor. He told the Court he in fact mentioned the solicitor of a particular trader with whom Mr. O’Mahony had had business dealings with in Portlaoise. He told Mr. Cross, however, that at the time of signing up of the first contract, which he said took place on the 28th of April, he had not checked to see if the O’Mahonys had taken any legal advice in the interim from either Mr. Casey or any other solicitor.
102. Mr. Cross asked what the purpose of the 15 year lease would be in the context of a sale of the property. Mr. Ó Siodhachain stated that the first contract was “facilitatory” in the sense that if anything went wrong, both of the parties would be protected by the leases. Mr. Ó Siodhachain gave as an example the possibility of a car accident happening which might affect one or more of the parties. He also felt it could constitute a form of security to raise funds. It was not written in for tax reasons of any sort.
103. In November 1999 the O’Mahonys asked to be released from the Sundays Well transaction, something which he and Mrs. Herron were quite willing to do. In the discussions which then took place, a sum was agreed for rent up to the probable closing date. Mr. Ó Siodhachain stated that this was a round figure to cover the time from the commencement of occupation of the plaintiffs at Ballybeg until the loan which would enable them complete the purchase came through. Apart from this variation, Mr. Ó Siodhachain stated that the O’Mahonys were willing to confirm all the other arrangements in relation to the farm at Ballybeg insofar as the plaintiffs were concerned.
104. Mr. Ó Siodhachain stated he was aware the O’Mahonys needed money for their business plans, including the project at Rathmore in respect of which he had helped them with financial projections. Insofar as closing the farm deal with the O’Mahonys was concerned, Mr. Ó Siodhachain stated that he and Mrs. Herron tried to get funds from lending institutions. However, as neither of them had any conventional income, they could not raise this finance in Ireland. They therefore tried to secure the loan from a company in the UK which specialised in asset based loans. They were for all practical purposes approved for such an advance in 2000, but the foot and mouth epidemic put paid to those arrangements. At a later stage the application for funding from the UK was reactivated, but although the plaintiffs were approved in principle for a loan, the lending institution declined to advance funds in Ireland.
105. Insofar as the third contract was concerned, Mr. Ó Siodhachain stated that Geraldine O’Mahony was quite desperate because of financial pressure. She was anxious to have a contract executed for the purpose of obtaining finance. He had asked her if £100 was a sufficient deposit if the plaintiffs assisted in the execution of a third contract and she agreed. Even her own solicitor saw this deposit figure as ludicrous. Mr. Ó Siodhachain stated that the deposit figure was always intended to be £100 in the third contract, and not 10%, or £22,000, which insertion was amended by his solicitor.
106. After they executed the third contract, they kept phoning Mr. Enright to see if signed contracts had been returned. Mr. Enright kept saying that they had not come in yet.
107. Mr. Ó Siodhachain stated that the plaintiffs were concerned about the financial predicament which were the O’Mahonys were in. The plaintiffs felt they might be able to help the O’Mahonys by releasing the farm portion of the lands from the contract so that the O’Mahonys could in turn sell it and reduce their financial overheads. Against that background, he rang Mr. Casey and asked if he would meet with them, a proposal to which Mr. Casey agreed.
108. At the meeting, Mr. Casey said that the offer to not purchase the farm was really of no use, that no one would now buy the farm in the middle of a foot and mouth crisis. Mr. Ó Siodhachain stated that they also offered to vacate the dwellinghouse within a reasonable time. They also discussed the possible extension of the closing date in the contract, and Mr. Ó Siodhachain asked for one month beyond the 15th March deadline. Mr. Casey stated that more time would be required and asked if the plaintiffs would have their own solicitors write a letter to him seeking the extension in question.
109. In 2000, Mr. Ó Siodhachain stated that Mr. O’Mahony’s attitude changed and he became very two faced. Mr. Ó Siodhachain therefore stopped calling to Rathmore. After March 2001 Mr. O’Mahony resorted to threatening behaviour and was involved in a number of incidents. He kept opening and leaving open the plaintiffs gates and went through various outhouses and sheds without permission. He brought out the auction sign which had been put away and generally made a nuisance of himself with the plaintiffs. It was against that background that Mr. Ó Siodhachain had written a letter in early April threatening legal proceedings to injunct Sean O’Mahony from these activities.
110. Mr. Ó Siodhachain told Mr. Cross that he didn’t really know in any legal sense what a lease was. He accepted there was no mention of any rent in the first contract, because at that time the O’Mahonys were going to purchase the Cork property in exactly the same way as the plaintiffs were buying the farm at Ballybeg. Once the back to back arrangements ceased to exist, Mr. Ó Siodhachain accepted that some rent would have to be paid in respect of their occupation of the farm. He could not say why this sum for rent if agreed and identified as such was not mentioned or included in the second contract or described as such in the third contract.
111. Mrs. Herron told the Court that from August 1998 onwards she spent a great deal of time in Donegal, Dublin and Cork. She had three or four cases in progress in Dublin for people she was helping. She also had a Supreme Court appeal of her own in preparation and in October was doing a law course in UCC. In addition, her son was in hospital in March 1999 in Cork and required daily visits from her.
112. She accepted, however, that she would call on average about twice a week while passing the shop at Gneegevuilla and in this way became very friendly with Mrs. O’Mahony. She confirmed that the O’Mahonys had come with them to Donegal in October 1998 for several days when they looked at a range of properties. At a later point they also looked at a property in Banna, Co. Kerry.
113. She developed a friendship with Geraldine O’Mahony and noticed on one occasion that she was very upset while Mrs. Herron was present in the house. Mrs. Herron followed Geraldine into her kitchen where Geraldine confided certain matters in her. After that she would also confide in Geraldine and they became friends and remained so until March, 2001. Mrs. Herron told the Court that when the plaintiffs first met the O’Mahonys, it was her impression that they were an entirely dysfunctional family. She did not accept that pressure had been put on the O’Mahonys to sign the first document. The only pressure lay in the fact that the plaintiffs had to quickly find somewhere else to live as their stay in Scartaglen was ending. Mrs. Herron felt they had been strung along for weeks by the O’Mahonys. The purpose of the letter dated 10th April 1999 was to deal with a situation where the O’Mahonys parents would not move out of Ballybeg. The O’Mahonys had failed to spell out clearly to Sean O’Mahony’s parents that they had to go.
114. Mrs. Herron insisted that the parties worked from a longhand draft on the 23rd of April during the all night discussion. Thereafter she prepared the typed document from the longhand draft on the 26th and gave it to the O’Mahonys that evening. Everyone signed the document on the 28th. She had no recollection that Sean O’Mahony changed the figure for renovations from £75,000 to £95,000 on the typed document.
115. On the night of the long discussion, Geraldine and herself had sat away from the two men who were by the fireside. Mr. O’Mahony nit picked through every single item in the agreement. In the end, Mrs. O’Mahony told her husband to give it a rest or conclude it.
116. She accepted that she put in the preamble by way of addition to the text contained in the draft when preparing the first contract. At that time she knew nothing about land law or property law. It was only when pursuing her LLB course that she learned anything about leases or the Statute of Frauds or such matters.
117. Mr. Cross pressed Mrs. Herron as to whether or not the question of legal advice had arisen prior to the execution of the first document. Mrs. Herron stated that they had recommended to the O’Mahonys that they get legal advice, but the O’Mahonys did not want to go to Mr. Casey because he was acting for the O’Mahony parents as well. The plaintiffs had suggested that the O’Mahonys go to someone else. However, when the document was signed up on the 28th, Mrs. Herron accepted she did not ask if the O’Mahonys had sought or received any independent legal advice in the meantime.
118. In relation to the second contract, Mrs. Herron was adamant that the deposit was paid out of her own moneys and produced a draft for the deposit drawn on her own bank, TSB in Killarney. She denied that the money in question had been given to her by Geraldine O’Mahony. She did become aware, when Mr. Casey would not allow the plaintiffs sign the second contract, that Mr. Casey wanted to see the title deeds to her Cork property. She contacted Cork Corporation who had a mortgage over the property, but it took her some considerable time to get the title documents and as she never got a formal request for same from Mr. Casey she decided not to hand them over. When the O’Mahonys pulled out of the Cork transaction in November in 1999, the plaintiffs then offered to pay for the use and occupation of Ballybeg from the time they had moved in up to the probable closing date for the transaction. A sum of £6,000 was suggested by Mr. Ó Siodhachain and accepted by the O’Mahonys. Other all aspects of the arrangements concluded in April 1999 were confirmed.
119. When the second contract failed, Mrs. Herron stated that the plaintiffs continued trying to raise funds to complete the purchase of Ballybeg. She confirmed the difficulties as outlined by Mr. Ó Siodhachain.
120. In relation to the third contract, Mrs. Herron stated that Geraldine came to her in September 2000 saying she needed a letter of intent to purchase Ballybeg, which the plaintiffs gave her. She later stated that the lending institution was not satisfied with the letter of intent, that she needed a signed contract. Mrs. Herron explained that the plaintiffs did not at that time have the necessary 10% deposit, whereupon Geraldine O’Mahony stated that £100 would suffice and that she would make her solicitor take it. At no stage were the plaintiffs ever told that the O’Mahonys had not signed this third contract.
121. From 2000 onwards, Sean O’Mahony’s attitude towards the plaintiffs changed, although she remained friendly with Geraldine, often helping her in the supermarket following the O’Mahonys move to Rathmore in November 2000. In the new year of 2001, Sean O’Mahony became markedly hostile. He would make snide and nasty remarks and kept asking if the plaintiffs had the money to close the purchase, stating that the closing date was approaching. Geraldine had told Mrs. Herron that she was under terrible financial pressure.
122. The plaintiffs called to Mr. Casey’s office in March 2001 in circumstances already outlined by Mr. Ó Siodhachain. They told Mr. Casey they wanted to help the O’Mahonys. Mrs. Herron said they offered to give up the 40 acres of land and buy only the farmhouse. Mr. Casey said no one would now buy the farm during the foot and mouth crisis. They also offered to give up the house and move out altogether if given reasonable time. Mrs. Herron said that the plaintiffs told Mr. Casey they were awaiting funds, whereupon Mr. Casey suggested extending the closing date. Mr. Casey suggested a longer period than that mentioned by the plaintiffs and suggested that the plaintiffs have their solicitor write to him officially, seeking an appropriate extension. Such a letter was sent by their solicitor to Mr. Casey on the 7th of March 2001.
123. The 15th of March came and went Mrs Herron stated the plaintiffs assumed the extension was operating. Mr. O’Mahony continued to be nasty and unpleasant and when he put the FOR SALE sign, which had been in a shed, in a position where it could be seen outside the farmhouse in Ballybeg by passing traffic, they caused a letter to be sent in early April threatening proceedings against him. Notice to Quit was then served on them.
124. At a late stage in her evidence, Mr. Cross asked Mrs. Herron to put some sort of figure on the moneys which Geraldine O’Mahony had advanced to her during the term of their acquaintance. Mrs. Herron initially stated that she had received loans from Geraldine O’Mahony amounting to somewhere between £15,000 – £30,000 in total. Mr. Cross then put to Mrs. Herron a letter which she had written in May, 2000 acknowledging that as of that date a sum of £35,000 was due in respect of loans advanced by Geraldine O’Mahony to her. Mrs. Herron accepted that this was so and acknowledged her obligation to pay the sum back to Mrs. O’Mahony, whom she described as a very generous person.
Submissions of the Parties
125. On behalf of the defendants, Mr. Cross contended that the document dated 28th April 1999 was not effective to create a valid lease. Section 4 of Deasy’s Act required that any contract to create the relation of landlord and tenant for any definite period of time, not being from year to year or any lesser period, must be evidenced by note in writing. While the document was executed by all parties, clauses 11 and 12 were those provisions relied upon by the plaintiffs to suggest that a lease had been created. No other documents of any kind whatsoever had been produced to amplify or vary those terms which conspicuously failed to make provision for rent of any kind. Section 3 of Deasy’s Act specifically provided that the relationship of landlord and tenant is founded on contract made between the parties in all cases where there is an agreement by one party to hold land from another in consideration of rent.
126. While the plaintiffs had argued that upon their release from the Sundays Well agreement, the original agreement of April 1999 had been varied so as to provide for a rent of £6,000, there was no note or memorandum of this amended agreement, if any.
127. The document in any event was clear that its effect would come to an end on the 8th of December 1999. It was at all times obvious that the “leases” would remain in force only until superseded by the contracts as set out in the preamble which had to be signed before a specified date, failing which the whole arrangement came to an end. Alternatively, he submitted, the document was self contradictory, and as it was prepared by the plaintiffs, it should be construed against them under the contra preferentem rule. Alternatively, there had been a total failure of consideration in respect of the April 1999 document. The plaintiffs had paid no money of any kind to the defendants. The document relied upon failed to specify any rent for any purported lease.
128. Secondly, it was submitted that if the document of April 1999 was effective to create some sort of valid lease, it was procured by undue influence or other circumstances of oppression and unfairness which demanded that the Court should set it aside.
129. Both parties in their submissions were in agreement as to the legal requirements necessary for the court to intervene on this basis. Firstly, it could be established by the claimant that the alleged wrongdoer exerted actual undue influence on the complainant to enter into the particular transaction being impugned. Alternatively, undue influence could be presumed where there was a relationship of trust and confidence between the complainant and wrongdoer of such a nature that it was fair to presume that the wrongdoer abused the relationship in procuring the complainant to enter into the impugned transaction. Once a confidential relationship had been established by evidence, the burden shifted to an alleged wrongdoer to prove that the complainant entered into the impugned transaction freely, for example by showing that the complainant had independent legal advice.
130. Certain relationships, such as solicitor inclined, raised the presumption as a matter of law. Even where the relationship did not fall into that category, the complainant could still establish the de facto existence of a relationship under which the complainant generally reposed trust and confidence in the wrongdoer, whereupon the existence of the relationship raised the presumption of undue influence. This formulation of the test had been approved by the Supreme Court in Bank of Nova Scotia -v- Hogan [1996] 3 IR 239, 246.
131. Mr. Cross submitted that the plaintiffs did in fact use actual undue influence on the defendants and on that ground alone the agreement could be set aside. Alternatively, the evidence clearly showed a relationship of trust and confidence reposed by the defendants in the plaintiffs prior to the signing of the document in April 1999 and thereafter, sufficient to shift the burden to the plaintiffs to establish that the defendants entered into the agreement freely and with independent legal advice. The evidence clearly showed that the defendants did not have the benefit of independent legal advice. Further, he submitted, the plaintiffs, and in particular the second named plaintiff, demonstrated in their evidence an understanding of the law far beyond that of a lay person, and certainly beyond that of the defendants. He submitted therefore on this limb of the test, that the plaintiffs had failed to discharge the onus of proof that the agreement had been entered voluntarily.
132. Mr. Cross further submitted that the agreement was manifestly improvident. The plaintiffs are currently living rent free in the defendants property. They have not sought to enforce any contract for sale, but rather their case is based on a contention that they enjoy a lease under which they are permitted to live at no cost in the plaintiffs property for 15 years.
133. Finally, in relation to the third contract, Mr. Cross submitted that there was no evidence that this document was ever executed by the defendants. Both defendants denied having executed the document, and this evidence was confirmed by the evidence of Mr. Terence Casey, the defendants solicitor. Furthermore, it was clear from the evidence that contrary to the suspicions held by the plaintiffs, the defendants did not rely upon any third contract, executed or otherwise, to raise finance from Anglo Irish Bank for the Rathmore supermarket.
134. If the various submissions of the defendants were accepted, Mr. Cross submitted that the court was clearly entitled to make an order for possession in the defendants favour.
135. Mrs. Herron submitted that there was the necessary note in writing sufficient to satisfy the requirement of Section 4 of Deasy’s Act. The original agreement made in April 1999, was varied orally in November 1999 when the defendants withdrew from the purchase of the plaintiffs property in Sunday’s Well. The variations were to the effect that the plaintiffs would remain in occupation of the defendants property under the 15 year lease, pending their purchase of the property to which the plaintiffs remained committed. The plaintiffs would pay to the defendants the sum of £6,000 for their occupation of the premises, such sum to be paid when the plaintiffs succeeded in selling their own property and closed the purchase of the defendants property.
136. Alternatively, if the formalities of Deasy’s Act or other legal requirements had not been complied with, the plaintiffs were entitled to an equitable lease under the rule in Walsh -v- Lonsdale [1882] 21 Ch D9. Alternatively, the plaintiffs were entitled to an equitable lease under and by virtue of the doctrine of part performance.
137. It was submitted that the alteration in the third contract of the purchase price from £214,000 to £220,000 was sufficient to satisfy the statutory requirements as to written form. Par 21 of Mrs. Herron’s written submissions sets out the various grounds relied upon in support of the contention that the amended leasing agreement was fully and adequately supported by part performance.
138. Mrs. Herron further invited the court not to hold that the April 1999 document created a licence. At par 28 of her submissions she refers to different types of licence, suggesting that the instant arrangements fall into none of the recognised categories. Further, by issuing a notice to quit and ejectment proceedings, the defendants implicitly conceded that a tenancy had been created.
139. Mrs. Herron’s submission on undue influence, though considerably more detailed than that submitted by Mr. Cross, did not differ as to the essential legal requirements. She submitted that there was no evidence of actual undue influence. She further submitted that there was no exclusive relationship between the parties resulting in the defendants placing trust in the plaintiffs so as to give rise to a presumption of undue influence. Alternatively, Mrs. Herron submitted, the evidence showed that the transaction was a free exercise of the defendants will and, in any event, no substantial benefit was obtained by the plaintiffs under the transaction. (Carroll -v- Carroll [1998] 2 ILRM 218). Alternatively, the defendants had forfeited any right to relief by delay and approbation.
140. In relation to the third contract, Mrs. Herron submitted that there was a concluded oral contract between the parties to sell the property to the plaintiffs in October 2000. It was accepted that the contract to purchase sent to the plaintiffs solicitor contained a clause that no contract would come into existence unless and until the contract to purchase was signed by the defendants. However, the defendants intention to sell their property to the plaintiffs had been their intention since April 1999 and the decision to engage professionals to draw up the contract to purchase was a legal requirement and formality which was not made with the intention of changing the terms of the contract in any way. It had been the plaintiffs belief that the defendants had executed this third contract, but even if they hadn’t, there were sufficient acts of part performance apparent from the evidence to enable the court to hold that it was effective and binding.
Conclusions
141. The Court has formed the most definite view in this case that the relationship between the plaintiffs and the defendants was at no stage a relationship between equals. On the contrary, the evidence clearly establishes that when the plaintiffs first met the defendants in August 1998, the plaintiffs were an experienced duo specialising in paralegal and litigation work, both on behalf of others and on their own account. Mr. Ó Siodhachain was a well known figure in the locality, both through his political, paralegal work and writings. Mrs. Herron, as both her personal and academic history and indeed her conduct of this case shows, is a woman with not only considerable experience of the law, but also is possessed of sharp mental skills and significant experience in contesting problems over a wide spectrum of issues.
142. By contrast, Sean O’Mahony left school at 16 years of age and has limited educational achievements. He is also to some degree handicapped as a result of injuries sustained in 1983 and visual difficulties which have left him with impaired eyesight. The evidence in the case also satisfied me that Sean O’Mahony is a person of considerable immaturity who, in 1998, had no clear or well thought out concept for his future life and that of his family. He was also clearly very much under the influence of his parents and acted, in the words of the plaintiffs, like a 15 year old. Throughout the hearing, the court had the opportunity of observing the demeanour of all the witnesses both in direct and cross examination. The Court witnessed the emotional collapse of Mr. O’Mahony at one point during the giving of his evidence, an event which required a short adjournment, and was ultimately left in no doubt and I do hereby find that Sean O’Mahony was at all relevant times an immature, emotionally underdeveloped and easily manipulated individual of limited intelligence. Insofar as his wife Geraldine is concerned, the evidence establishes to my satisfaction that she found the interference of her husband’s parents difficult to put up with, that it caused difficulties between herself and her husband at times, that she felt isolated and vulnerable and that these difficulties were all exacerbated following the introduction of the plaintiffs into their lives.
143. It is not necessary for me to find a particular number of days or dates upon which the plaintiffs visited the defendants during the period August 1998 – April 1999. I am more than satisfied on the evidence and hold that over that period the plaintiffs intervened in the lives of this young couple in a manner which was totally inappropriate for persons who had in mind purchasing the defendants property. I do not accept that these interventions were, as suggested by the plaintiffs, altruistic. They were, in my view, entirely designed to mould the defendants to the plaintiffs intention which was to secure the defendants property at Ballybeg on the best possible terms. In reaching this view, I am paying particular regard to the actions of the first named defendant in advising and recommending that Sean O’Mahony consult a psychiatrist, in arranging a particular psychiatrist whom he should consult with, and in suggesting questions for Mrs. O’Mahony to discuss with Dr. Kinsch. I accept in full Mrs. O’Mahony’s account of Mr. Ó Siodhachain behaviour during the period August 1998 – April, 1999. I further hold that Mr. Ó Siodhachain encouraged Mrs. O’Mahony to take steps and adopt life style behaviour with the object and intent of driving a wedge between herself and her husband. I do not say that the involvement of the plaintiffs was such as to amount to “brain washing” of the defendants or either of them, but, during the period August 1998 – April 1999, the plaintiffs infiltrated the lives of the defendants to such a degree, and from such a position of comparative strength, as to further imbalance an inequality of negotiating position between the parties which was present from the outset. In particular, I accept the defendants evidence that when they sought to have professional guidance in relation to the purchase of the Sundays Well property, that they were put off this idea by the plaintiffs. I further find and hold that at no stage up to and including the date of execution of the first document did the defendants have the benefit of independent legal advice. I further hold that on the evidence they were encouraged not to seek such advice and that the first named defendant made the representations described by the defendants as to the “facilitatory” nature of the first document and that he told them it was not worth the paper it was written on. At the time therefore of the execution of the document in April 1999, I hold and find that there was a relationship of confidence and trust reposed by the defendants in the plaintiffs, although I will also deal with the issue of actual undue influence in this case in due course.
144. I will now turn to the issues.
145. I accept Mr. Cross’ submissions in relation to the document executed in April 1999. It is quite clear that what this document envisaged was an exchange of properties by means of sale within a specified period. I am satisfied the reference to a “lease” in the document was not designed to create a lease as such but was intended rather to provide some sort of legal basis for occupation of the respective properties between the date of the document and the closing date on the 8th December 1999. It cannot in my view be regarded as a lease, because it fails to specify any rent. Further, I do not accept that this document was varied in any specific way by any agreement in November 1999 when the defendants withdrew from the Sunday’s Well purchase. I find it inconceivable, having regard to the meticulous way in which Mrs. Herron fastens upon and records such matters, that such an agreement, if made, would not be reflected in the second or third contracts, or in some other documentation or correspondence between solicitors. While Mrs. O’Mahony in cross examination may have said that she believed an offer of £6,000 was at some point made in respect of rent, Sean O’Mahony stated that the £6,000 in question was an adjustment to the purchase price to reflect the increase in value of Ballybeg between the date of the original document in April 1999 and October 2000. I prefer Sean O’Mahony’s evidence on this point, supported as it is by the singular absence of any other written record of some such supposed variation of the April 1999 document.
146. In my view the arrangements between the parties fell through completely as of December 1999, following which the plaintiffs were allowed to remain on as permissive occupants of the property against a background where both sides hoped the plaintiffs would produce the purchase moneys to complete the acquisition of the farm at Ballybeg.
147. I also accept that where contradictions appear in the document of April 1999, they must be construed against the plaintiffs who prepared them. The plaintiffs in evidence themselves accepted that the document should not be construed as conferring a rent free facility to the plaintiffs to live on the defendants farm for 15 years. In just the same way as the description of a tenancy arrangement as a licence cannot convert a lease into a licence, the converse seems to me to be equally true, namely, that the description under the name of a ‘lease’ of a licence or caretakers agreement cannot operate to convert a permissive occupant into a tenant where all the usual characteristics of a leasing agreement are absent. In the instant case, there is no mention in the April 1999 document of even a single covenant, such as would characterise a lease. (Gatien Motor Co -v- Continental Oil Co. [1979] IR 406).
148. Nor do I accept Mrs. Herron’s submissions that any deficiencies in legal form can be compensated under the equitable doctrine of part performance. The evidence overwhelmingly establishes that at no time were the plaintiffs ever in a position to complete the purchase of the Ballybeg property, nor did they either pay rent or any portion of the purchase moneys. As the evidence shows, a number of judgments have been obtained against Mrs. Herron during the period up to November 1999 which, because they were unsatisfied, led to judgments being registered against her property in Sunday’s Well. She had in addition by mid 2000, borrowed £35,000 from Geraldine O’Mahony, a liability she acknowledged herself in evidence. This inability to at any stage complete the transaction does, in my view, effectively put paid to any suggestion that the doctrine of part performance can be relied upon in any way in this case. Nor in my view do the plaintiffs come to court with clean hands as my findings make clear.
149. The rule in Walsh -v- Lonsdale seems to me to have no application on the facts as found by me in the instant case. This doctrine was developed to provide for the enforcement of an informal lease for valuable consideration by applying the maxim “equity regards as done what ought to be done”, whereby the parties would be treated in equity as being in the same position from the beginning as if a proper formal lease had been executed. This situation usually arose where there was no adequate note or memorandum in writing of an agreement, but where there were sufficient acts of part performance to take the case out of the Statute of Frauds. However, it almost goes without saying, that the parties must have intended to create a lease, which I have found was not the fact or intention. Even if I am mistaken in this respect, the doctrine is in any event dependent upon the availability of the remedy of specific performance in the particular case, which is a matter within the discretion of the court. If the remedy is not available on the facts of the particular case, the doctrine cannot apply. I have already set out the reasons which coercively persuade the court that it should not exercise its equitable jurisdiction in favour of the plaintiffs in this particular case.
150. I propose to deal with the issue of undue influence, lest it be held elsewhere that the document executed in April 1999 has the effect contended for by the plaintiffs.
151. In my view there was actual undue influence in this case. As already mentioned, the court regards it as totally inappropriate for an intending purchaser to have interfered and intervened to such a degree, as occurred in this case, in the lives of the parties from whom it was intended to purchase a farm and property. I am satisfied from the evidence that Mr. Ó Siodhachain did endeavour to drive a wedge between husband and wife, so as to make Mr. O’Mahony more malleable in the terms he would seek for the sale of the family farm. I am satisfied he completely won over Geraldine O’Mahony, who seems to have followed his every advice and suggestion, to the extent of following practical philosophy courses in Killarney and collaborating with Mr. Ó Siodhachain in formulating questions to put to Dr. Kinsch about her husband’s behaviour on the occasion when Dr. Kinsch was due to visit the family farm. It is important to note that the making of the agreement in April 1999 was preceded by a letter from Mr. Ó Siodhachain to the O’Mahonys threatening to make them responsible, not only for rents incurred by the plaintiffs if they could not immediately move into Ballybeg, but holding them responsible also for any other loss of income which Mr. Ó Siodhachain might suffer as a result. These threats must be seen in context. By this time, the plaintiffs had insinuated themselves into the lives of the defendants over a period of months and I am satisfied were regular visitors to the defendants home at Gneegevuilla. I also accept the description in evidence given by both O’Mahonys as to how the plaintiffs won them over and, in certain respects, instilled a fear into them as regards the possible consequences of non co-operation with the plaintiffs. The letter written on the 10th of April can only, in my view, be seen as the severest form of pressure on the defendants to co-operate with the wishes of the plaintiffs or face those consequences.
152. I am also satisfied from the evidence that on the night of the all night discussion, the plaintiffs arrived in a brisk and business-like manner, quite determined to conclude matters. There is no dispute or argument about the fact that the parties sat up all night until 6 am before agreement was reached. It is hard to imagine a less satisfactory manner of negotiating to conclusion an important event in the lives of the O’Mahonys than this. The plaintiffs were obviously aware that the defendants did not have the benefit of legal advice in relation to the matters under discussion on the night in question. I do not accept the evidence of the plaintiffs that they recommended to the defendants that they seek and obtain such advice. Instead I prefer the evidence of the defendants that they were advised not to seek legal advice, and that they were content to go along with this based on representations made by Mr. Ó Siodhachain that the document “was not worth the paper it was written on”.
153. I think it more probable that in relation to the date of signing by the parties, that the evidence given by the plaintiffs may be more accurate. In other words, I accept that the document had to have been typed up following the all night meeting, that it had to be re-presented to the defendants when that had occurred. However, it seems to me to make absolutely no difference to the issue I have to determine, given the absence of independent legal advice prior to the execution of the agreement.
154. I am also satisfied that this agreement was an extremely improvident one from the point of view of the defendants, as subsequent events have all too clearly demonstrated. To the extent that the lease may be considered valid, thereby creating a rent free 15 year occupation of the defendants farm by the plaintiffs, it is difficult to imagine more a catastrophic outcome from the defendants point of view. The distress of the defendants, which was all too apparent during the hearing before me, can only have been compounded as increasing financial pressures came on them from banks and other lending institutions while the plaintiffs continued to fob them off with promises of completing the purchase which never materialised. It follows from the findings I have made, that I do not need to consider the alternative basis upon which the court may intervene, namely, that of presumed undue influence. It equally follows that if I am mistaken in my assessment of the witnesses and their evidence on the issue of actual undue influence, it is still open to me to hold, and I do so hold, that the onus of disproving presumed undue influence in the context of a relationship of trust, which I find to have existed, has not been discharged in this case by the plaintiffs.
155. It was urged upon the court to treat the delay in moving to set aside the April 1999 document as an approbation of the arrangements put in place in consequence. However, I am quite satisfied that the defendants continued under the influence of the plaintiffs throughout 1999/2000, a situation which was compounded by the severe financial pressure which came to bear on them from October 2000 onwards. Even on the plaintiffs own evidence, the defendants were at that stage desperate for money. Nonetheless, they did not, and I so find, disclose to their own solicitor the existence of the April 1999 document until all hope was gone following the passing of the final closing date in the third contract on the 15th day of March 2001. This non-disclosure in my view was a direct result of the influence exerted on the defendants by the plaintiffs.
156. I turn then to the issue in relation to the third contract, i.e. the contract prepared in October, 2000.
157. In this regard, I accept fully the evidence of Mr. Terence Casey to the effect that this document was never signed by either of the defendants, or by him on their behalf. I also accept his evidence that this document was never used by way of collateral or security for any lending institution, and in particular, was not used for the purpose of raising finance from Anglo Irish Bank. I accept his evidence that this document never left his office and I accept fully the reasons offered by him as to why that was so. I also accept fully his evidence that he first became aware of the April 1999 document some time in March, 2001, when he called his clients into the office to discuss the situation arising when the third contract was returned with a deposit of only £100. Again, on this point as to when Mr. Casey first learned of the existence of this document, the defendants themselves gave conflicting evidence, Mrs. O’Mahony agreeing with Mr. Casey, but Mr. O’Mahony stating, mistakenly in my view, that he believed this document had been mentioned to Mr. Casey some time in November/ December, 1999. I am satisfied that any error on this point by Mr. O’Mahony arose from the lengthy period which he spent in the witness box and the manifest distress under which he laboured while giving evidence.
158. Accordingly, I hold against the plaintiffs on this issue also.
159. This brings me finally to the defendants claim for possession.
160. When this matter was first aired before me in October 2001, I acceded to Mrs. Herron’s request to injunct and halt the District Court ejectment proceedings on very specific conditions. Those conditions included requirements that pleadings be exchanged within specified time limits and that discovery equally take place between specified time limits, all with a view to having the case moved forward to a list to fix dates in early 2002. I expressly stated at the time that I was doing so as an exercise in case management and with a view to having all issues determined in a full plenary hearing. Such a hearing has now taken place before this court, extending over a period of 5 days, some 3 days longer than the parties indicated to the court at the outset of the hearing.
161. In view of my finding that the plaintiffs occupied the defendants farm at Ballybeg as permissive occupants only, that entitlement to remain in occupation terminated following the demand made for possession by the Notice to Quit. While Mrs. Herron makes the point that the Notice to Quit refers to a tenancy from week to week, Mr. Casey explained in evidence that this was inserted merely because he saw it as the most appropriate way to deal with a permissive occupancy. While a very short period only was provided to the plaintiffs to vacate the property, the fact remains that they have not done so and continue to occupy and reside in the property, paying no rent, from May 1999 up to and including the present.
162. In my view, the demand made was adequate to terminate the permissive occupancy and I accordingly declare that the defendants are entitled to an order for possession of their lands at Ballybeg.
163. While the court heard evidence that a sum of £35,000 remains due and owing by Mrs. Herron to Mrs. O’Mahony, it was accepted by Mr. Cross that this sum, although undoubtedly due, forms no part of the defendants claim in the present proceedings and I am accordingly making no order in relation to that liability.
Ulster Bank Ireland Ltd. v. Fitzgerald
[2001] IEHC 159 (
JUDGMENT of Mr. Justice Diarmuid B. O’Donovan delivered on the 9th day of November, 2001 .
1. At the outset, on the application of Counsel for the Plaintiffs to which the Defendants did not object, I amended the title to these proceedings by substituting the name Ulster Bank Ireland Limited for the name Ulster Bank Limited as Plaintiffs.
2. The Plaintiffs claim herein, as against the First Named Defendant, is for the sum of £203,971.85, together with interest thereon, and, as against the Second Named Defendant, for the sum of £106,832.92, together with interest thereon. The said sums of money are alleged to be due and owing by the Defendants to the Plaintiffs; firstly, in respect of monies advanced by the Plaintiffs to and at the request of the Defendants and each of them on foot of a joint and several personal Current Account number 53631019 (hereinafter called the “Current Account”) maintained by the Defendants at the Tralee Branch of the Plaintiffs Bank situate at 43-44 Ash Street, Tralee in the County of Kerry, secondly being monies due and owing to the Plaintiffs by the Defendants for principal and interest under and by virtue of a guarantee in writing dated the 16th October, 1997 whereby the Defendants and each of them, in consideration of the Plaintiffs giving time, credit, banking facilities or other accommodation to Fernhill Developments Limited of 11 Denny Street, Tralee, County Kerry (hereinafter called “the Debtor”), guaranteed payment to the Plaintiffs on demand of all present or future or actual contingent liabilities of the Debtor to the Plaintiffs howsoever incurred and, thirdly, monies due and owing by the Defendants to the Plaintiffs for principal and interest under and by virtue of a guarantee in writing dated the 12th March, 1998 whereby the Defendants and each of them, in consideration of the Plaintiffs giving time, credit, banking facilities or other accommodation to the said Debtor guaranteed payment to the Plaintiffs on demand of all present or future or actual or contingent liabilities of the Debtor to the Plaintiffs howsoever arising.
3. By Order of this Honourable Court made herein on the 26th June, 2000, it was Ordered ( inter alia ) that the Plaintiffs do recover from the First Named Defendant a sum of £215,881.34 and the cost of these proceedings, when taxed and ascertained.
4. The Plaintiffs claim aforesaid against the Second Named Defendant came on for hearing before me on Wednesday 10th October, 2001. At the commencement of the hearing, Counsel for the Second Named Defendant indicated to me that, in accordance with paragraph 12 of an Affidavit sworn herein by the Second Named Defendant on the 4th February, 2000, she accepted liability to the Plaintiffs for the principal sum of £10,169.35, together with interest thereon amounting to £1,036.57, on foot of the Current Account aforesaid and, for their part, Counsel for the Plaintiffs indicated that they were satisfied to accept the said sums in satisfaction of their claim against the Second Named Defendant on foot of the said Current Account.
5. Insofar as the Plaintiff’s claims against the Second Named Defendant on foot of the said guarantees in writing, respectively dated the 16th October, 1997 and the 12th March, 1998, were concerned, the Second Named Defendant, through her Counsel, maintained that the said guarantees in writing were not enforceable against her for the reason that, while she accepted that the signatures to the said guarantees, which purported to be hers, were, in fact, made by her, she asserted; on the one hand, that she, personally, had no financial interest in either of the said guarantees and, on the other, that she had been persuaded to execute the said guarantees by an undue and wrongful influence exercised over her by the First Named Defendant who is her husband; a wrongful influence of which the Plaintiffs were aware, or are deemed to have been aware.
6. In the course of the hearing before me, I heard evidence from a number of witnesses and, in particular, I heard evidence from Mr. Teddy Reynolds, who was the Manager of the Branch office of the Plaintiff’s Bank situate at Ash Street, Tralee in the County of Kerry at the material time, and from the Second Named Defendant, Catherine Williams (otherwise Fitzgerald). Mr. Reynolds gave sworn testimony that he had witnessed the signatures of both of the Defendants to the said guarantees respectively dated the 16th October, 1997 and the 12th March, 1998 and he said that both guarantees were signed by each of the Defendants on the dates upon which each guarantee purported to have been signed and that they were signed by each of the Defendants in his presence and, in his office at the Plaintiff’s Bank at Ash Street aforesaid. He agreed that the Defendants were not present together, on the occasions upon which each of the said guarantees had been executed by them. However, he said that, before each of the Defendants had executed the said guarantees he had explained to each of them the meaning of the guarantees and the reason why they were required by the Plaintiff bank. Moreover, he was adamant that, before the Second Named Defendant had executed either of the said guarantees, he had told her that she could obtain legal advice with regard to the guarantees. However, notwithstanding that advice, she had signed the guarantees on the spot. Mr. Reynolds’ testimony was challenged on two grounds; firstly, it was put to him that, while the Second Named Defendant conceded that she had executed both of the said guarantees and while she conceded that she could not recall exactly when and where she had executed them, she would say that they had not been signed by her in his presence. Furthermore, it was put to him that the First Named Defendant could not, as Mr. Reynolds had asserted, have signed the said guarantee of the 16th October, 1997 in his office at the Defendant’s bank at Ash Street aforesaid because the fact of the matter was that, on that date, the First Named Defendant had attended a conference in Dublin and, accordingly, had not been physically present in the town of Tralee during banking hours. In that regard, the Second Named Defendant gave a sworn testimony that, while she accepted that she had executed both of the said guarantees and that she could not recall, precisely, when and where the said guarantees had been executed by her (she thought, perhaps, that she had signed them at her home), she was adamant that she had never signed either guarantee in the presence of Mr. Reynolds in his office. Moreover, the Second Named Defendant gave sworn testimony that, on the 16th October, 1997, her husband, the First Named Defendant, had attended a conference in Dublin and, accordingly, had been away from the town of Tralee for the entire of the day and, therefore, could not, as Mr. Reynolds had asserted, have signed a letter of guarantee on that date in Mr. Reynolds office. Furthermore, I heard evidence from a Ms. Renee McManus who, at the material time, was Personnel and Administration Manager of the C.I.F and who said that, on the 16th October, 1997, she had been responsible for organising a conference hosted by the C.I.F. in the city of Dublin; a conference which had commenced at 8 o’clock am. Ms. McManus produced a register purporting to the list the names of the persons who had attended that conference and, among those names, is that of Kenneth Fitzgerald. However, Ms. McManus could not say for how long the person named as Kenneth Fitzgerald on the said list, had attended the said conference; nor, indeed, did she ever say that she had actually seen the First Named Defendant at the said conference. The clear implication of the evidence of Ms. McManus, when taken in conjunction with that of the Second Named Defendant, was that the First Named Defendant could not having signed the said guarantee of the 16th October, 1997 in the office of Mr. Teddy Reynolds at the Plaintiff’s bank at Ash Street aforesaid, as Mr. Reynolds had asserted and that, therefore, Mr. Reynolds testimony in that behalf was, to say the least of it, unreliable and, accordingly, he could not be considered to be a credible witness. However, although I was advised by Counsel for the Second Named Defendant that the fact of the matter was that the First Named Defendant had been in Court at all material times throughout the hearing of these proceedings, he was never called as a witness to contradict Mr. Reynolds’ evidence that he had signed the said guarantee of the 16th October, 1997 on that date and that he had signed it in Mr. Reynolds office aforesaid. In those circumstances and, given that Mr. Reynolds positively denied the suggestion that Kenneth Fitzgerald had not signed the said guarantee dated the 16th October, 1997 on that date in his office, I do not accept that he did not do so. As judgment has already been obtained against Mr. Fitzgerald and, therefore, he could not be prejudiced by giving evidence and exposing himself to cross examination, I think that I am entitled to infer from his failure to do so that he is not prepared to give sworn testimony that he did not, as Mr. Reynolds has said that he did, sign the said guarantee of the 16th October, 1997 on that date in Mr. Reynolds’ office. Accordingly, notwithstanding the evidence of the Second Named Defendant and that of Ms. McManus, I accept Mr. Reynolds’ evidence that Kenneth Fitzgerald did indeed sign the said guarantee of the 16th October, 1997 on that date and in Mr. Reynolds office aforesaid. Moreover, as it follows that I consider that the evidence of Catherine Williams (Catherine Fitzgerald) in that behalf is, to say the least of it, unreliable, I also prefer the evidence of Mr. Reynolds that Ms. Williams (Fitzgerald) signed both of the guarantees aforesaid in Mr. Reynolds office, in his presence and upon the dates upon which each guarantee purports to have been executed to the evidence to the contrary given by Ms. Williams (Fitzgerald).
7. While, as I have already indicated, Catherine Williams (Catherine Fitzgerald) accepted in evidence that she had executed the said guarantees in writing respectively dated the 16th October, 1997 and the 12th March, 1998, she maintained that she could neither recall the dates upon which she had executed either of those documents or where she was at the time that she had executed them. Moreover, she was adamant that she had not executed them in an office at the Tralee Branch of the Plaintiff’s Bank at Ash Street aforesaid and that she had not executed them in the presence of Mr. Reynolds. As I have also indicated, I do not accept her evidence in that regard because I prefer the evidence of Mr. Reynolds with regard to when and where Ms. Williams (Fitzgerald) executed those guarantees. Ms. Williams (Fitzgerald) also asserted in evidence that, when she was signing the guarantees, she did not appreciate what she was signing but that she did so because her husband prevailed upon her to do so. In that regard, she said that, had she not signed the guarantees at the request of her husband, there would have been extra problems between them; particularly, as he had insisted that he knew what he was doing and that she should trust him. In that context, Ms. Williams (Fitzgerald) gave evidence that, towards the end of the year 1997 and early in the year 1998, her marriage to Mr. Fitzgerald was in difficulties, that he worked long hours and was rarely at home, and when he was, he was inclined to drink to excess, became intoxicated and verbally abusive to her. She maintained that the situation was compounded by the fact that, during that period, their daughter, Laura, was very unwell and spent some time in hospital with the result that she and her husband were kept further apart. Indeed, Ms. Williams (Fitzgerald) made it very clear to me that she believed that her marriage was breaking up but that, after her husband had made an appointment for marriage counselling for both of them, which in fact, he subsequently cancelled, the relationship between them improved and he reduced the extent of his drinking. This would have been in the month of March, 1998 and Ms. Williams (Fitzgerald) offered this improvement in the relationship as one of the reasons for acceding to her husbands’ insistence that she execute the said guarantee of the 12th March, 1998, in that, had she not done so, she was convinced that it would cause further trouble between them and again threaten their marriage. She also told me that her husband had told her that, had she not signed the guarantee of the 12th March, 1998 there would have been insufficient monies available to pay the staff of the creditor with the result that the business of the creditor would collapse. In that regard, I was persuaded by the evidence of Ms. Williams (Fitzgerald) that she and her husband and children were dependant on the income from the business of Fernhill Developments Limited for their daily living.
8. In the light of the foregoing, I am prepared to accept that Kenneth Fitzgerald may, indeed, have exercised inordinate pressure on his wife to execute the guarantees aforesaid and I am prepared to accept that she believed that she had little option but to sign them. Moreover, while I do not think it necessary for the purposes of this Judgment to determine whether or not the influence in that regard exercised by Kenneth Fitzgerald over his wife was unlawful, I think that it may well have been so. However, whether or not it was, I heard no evidence whatsoever to suggest that Mr. Reynolds, or, indeed, any other representative of the Plaintiff Bank had even an inkling that there were difficulties in the marriage of Kenneth Fitzgerald and Catherine Williams (Catherine Fitzgerald) or that there was any other reason why Catherine Williams (Catherine Fitzgerald) might not had been a free agent; in the sense that she not do so of her own free will, when she executed the said guarantees. Accordingly, if the Second Named Defendant executed the said guarantees as a result of undue influence exercised over her by her husband, which, as I have indicated, may well be so; although I do not think it necessary for me to come to any conclusion on that point, I am satisfied that the Plaintiffs were not aware of that fact. Moreover, as it is well settled that, where they are parties to the same contract, the relationship of husband and wife does not give rise to a presumption of undue influence and, accordingly, the burden of proving undue influence is on the party alleging it, I am not persuaded that the Plaintiffs had constructive notice that the Second Named Defendant executed the said guarantees as a result of undue influence exercised over her by her husband; if that be the case.
9. Apart from the foregoing, Counsel on behalf of Ms. Williams (Fitzgerald) submitted that, as she had no financial stake in the business of the Debtor and her husband, Kenneth Fitzgerald, had, the Plaintiffs were on notice that there was a risk that she may have been unduly influenced by her husband to execute the said guarantees and, accordingly, they were obliged to urge that she obtain independent legal advice before she executed them. In that regard, Counsel submitted that it was not sufficient that Ms. Williams (Fitzgerald) be advised by the Bank that she was entitled to seek independent legal advice before executing the guarantees, as Mr. Reynolds said that he had advised her. Counsel argued that, in this case, it was especially necessary that Ms. Williams (Fitzgerald) be urged to obtain independent legal advice before executing the said guarantees because, by executing them, she was putting her family home at risk. Insofar as these submissions are concerned, I have to say that, I do not accept that Ms. Williams (Fitzgerald) did not have a financial stake in the business of the creditor. Certainly, she gave sworn testimony to that effect and, in particular, she said that she was neither a shareholder, nor a director of Fernhill Developments Limited and, that, while she may have signed documents in which she is described as the secretary of the company, she was not aware that she was the secretary thereof. Apart from the fact that that evidence appears to me to be inconsistent with the contents of an Affidavit which Ms. Williams (Fitzgerald) swore herein on the 4th February, 2000 in which she seems to acknowledge she was a shareholder and director of Fernhill Developments Limited, as I have already indicated, I was persuaded by her evidence that her family, which included herself, relied on the income generated by the business of Fernhill Developments Limited for their day to day living and, accordingly, I have no doubt but that she had a financial stake in the business of the company. Moreover, there is absolutely no substance to the suggestion that, by signing the said guarantees, Ms. Williams (Fitzgerald) was putting her family home at risk because, in the event that the Plaintiffs enforced the said guarantees against her, their only relief would be a money Judgment which would not necessarily affect the family home.
10. In the circumstance thus I am satisfied that a presumption of undue influence does not arise merely because the two defendants (being husband and wife) executed the said guarantees respectively dated the 16th October 1997 and the 12th March 1998 and given that I am also persuaded that Catherine Williams (otherwise Fitzgerald) had a financial stake in the business of Fernhill Developments Limited, I do not consider that there was any obligation on the plaintiffs to urge on Ms. Williams (Fitzgerald) that she should obtain legal advice with regard to the said guarantees before she executed them. In that regard, there is no doubt but that the courts are not required to intervene to protect a contracting party from ill-advised action and, therefore, if it be the case that it was ill-advised for Ms. Williams (Fitzgerald) to execute the said guarantees (I am not convinced that it was) the court is not entitled to relieve her of her obligations thereunder merely because a more prudent person might not have signed them. Neither, in the absence of any actual or constructive knowledge that Ms. Williams (Fitzgerald) was not a free agent when she executed the said guarantees (if it be the case) were the Plaintiffs under any obligation to take any special steps to ensure that she obtained independent legal advice. Indeed, given that the actual forms of guarantee executed by Ms. Williams (Fitzgerald) contained a note at the top headed by the words “IMPORTANT” strongly recommended that any persons signing the guarantee should seek independent legal advice before doing so, I think that it was above and beyond the call of duty for Mr. Reynolds to advise Ms. Williams (Fitzgerald) to seek independent legal advice before signing those guarantees, as I am satisfied that he did. In this regard, I was referred to a number of authorities; the suggested import of which was that, in the particular circumstances of this case, there was an obligation on the part of the Plaintiffs to warn Ms. Williams (Fitzgerald), before she signed the said guarantees, that she and her matrimonial home were potentially liable for the debts of the creditor and that, therefore, it was essential that she obtain independent legal advice before so doing. In particular, I was referred to the cases of Barclays’ Bank Plc. .v. O’Brien and Anor. ([1994] 1 AC 180) and The Governor and Company of the Bank of Ireland .v. Michael Joseph Smyth and (by order) Una Smyth ([1995] 2 IR 459). However, both of those cases were concerned with a direct threat to a family home; the Barclays’ Bank .v. O’Brien case arising from a bank’s attempt to enforce a surety executed by a wife with regard to a transaction in which she had no financial stake and the Bank of Ireland .v. Smyth , arising from a bank’s attempt to recover possession of a family home in respect of which the wife was alleged to have executed a consent pursuant to the Family Home (Protection) Act 1976. In this case, however, as I have already indicated, I am satisfied that no threat to Ms. Williams’ (Fitzgerald) family home resulted from the guarantees aforesaid executed by her and, in any event, she had a financial stake in both of those guarantees. In those circumstances, I reject the contention that the said guarantees are not enforceable against her.
11. As I have already indicated, the Second Named Defendant has accepted liability to the Plaintiffs for a principal sum of £10,169.35 with interest thereon amounting to £1,036.57 on foot of the current account aforesaid and, in the light of the evidence which I heard, I am satisfied there is currently due and owing to the Plaintiffs by the Second Named Defendant on foot of the said guarantee dated the 16th day of October 1997 a sum of £50,000 for principal and accrued interest thereon calculated to the 21st day of September 2001 amounting to £12,021.39 together with continuing interest thereon from the 21st day of September 2001 at a rate of £13.36 per day and on foot of the said guarantee the 12th day of March 1998 a sum of £45,000 for principal and accrued interest thereon calculated to the 21st day of September 2001 amounting to £11,514.59 together with continuing interest on the said sum at a rate of £12.02 per day the date of payment. Accordingly, there will be judgment for the Plaintiffs against the Second Named Defendant for a sum of £129,741.90 together with continuing interest at a rate of ….
Cases Unconscionability
Hart & Anor v Burbidge & Anor
[2014] EWCA Civ 992 (22 July 2014)
Lord Justice Vos:
Introduction
These appeals are from the judgment of Sir William Blackburne, sitting as a deputy judge of the Chancery Division, delivered on 12th June 2013 in two actions that Master Moncaster ordered to be tried together on 24th August 2011. The judge held that Mrs Susan Anne Burbidge (“Mrs Burbidge”) had been guilty of presumed undue influence over her mother Mrs Phyllis Hart, who was born on 29th July 1922 and died on 7th November 2008 aged 86 (the “deceased”). The undue influence related to three related transactions between February and October 2008: the sale of two properties at 7 and 43 Beacon Park Road, Upton, Poole (“No 7” and “No 43”), the net proceeds of which were transferred to Mrs Burbidge and her husband, Mr Brian Jeffery Burbidge (“Mr Burbidge”), and the transfer of some £290,000 from the deceased’s account at the Teachers Building Society to Mr and Mrs Burbidge. These transactions were referred to by the judge as the “impugned transactions”. I propose to adopt the same terminology. The impugned transactions produced a total of some £700,000 in the hands of Mr and Mrs Burbidge, which they used to purchase a property at Little Manor Farm (“Little Manor”), intended to be used as a home for them and the deceased. As things turned out, however, the deceased fell ill and died after only a few days at Little Manor.
The claims were brought by various beneficiaries under the deceased’s will. The first claim was brought by Mrs Burbidge’s two elder brothers, Mr Kenneth Hart (“Mr Ken Hart”) and Mr Paul Hart (“Mr Paul Hart”) (together the “Hart claimants” or the “Harts”), and the second claim was brought by the deceased’s three youngest surviving siblings, Mr Arthur Samways, Mr Graham Samways, and Mrs Christine Garlinge, together with Mr Ken Hart’s son, Peter Hart, and Mr Paul Hart’s two children, Lewis Hart and Gemma Hart (all of whom I shall refer to together as the “Samways claimants”).
The judge ordered that the parties should be put back in the position that they would have been in, had the impugned transactions not occurred. The deceased’s last will had made specific legacies of No 7 to the Hart claimants, and of No 43 to the Samways claimants. As a result of the sales of these properties, these gifts were adeemed. The judge’s order was aimed at requiring Mr and Mrs Burbidge to reimburse the deceased’s estate with the sums necessary to put the claimants in the position they would have been in (a) had these gifts taken effect in accordance with the deceased’s will, and (b) had the gift of £290,000 also not been made.
The appeals raise issues of fact relating to the alleged undue influence itself, and the appropriateness of the restoration orders to which I have referred, in addition to issues arising from the judge’s order for costs, and a question of procedure as to whether permission was, or ought to have been, granted to bring this appeal out of time. In the course of the hearing, the court granted the appellants permission to argue the costs points, which had been included in the skeleton supporting the application for permission to appeal, but not in the grounds of appeal themselves.
In order to understand the issues, it is first necessary to set out some of the rather complex chronological factual background, but I should pay tribute at the outset to the judge’s lucid presentation of these facts. It has made our task much easier. What follows should be regarded as nothing more than an essential summary.
Chronological background
On 4th January 2005, the deceased’s husband Ernest Hart died after a marriage lasting more than 60 years.
On 15th February 2006, the deceased made a will leaving some small legacies, and directing a sale of No 7 and No 43 and providing for the net sale proceeds to be shared between the Harts, free of inheritance tax, and leaving the residue to be shared equally between Mrs Burbidge and the Harts. Also on 15th February 2006, the deceased entered in to a deed of variation of her deceased husband’s will, gave an industrial property at Unit 15, Sunrise Business Park, Blandford (“Unit 15”) worth some £275,000 to Mr and Mrs Burbidge and released them from debts of some £44,000. As the judge found (paragraph 69) the deceased received detailed advice in relation to these transactions, the documentation was carefully explained, and there were several face to face meetings with Mr Gary Pick of Dickinson Manser, the deceased’s solicitor (“Mr Pick”). He commented that this was “in marked contrast to the course of events which accompanied the impugned transactions”.
On 3rd August 2006, the Harts were told at a family meeting that Unit 15 had been given to Mr and Mrs Burbidge. The judge found that they were upset and annoyed (paragraph 71).
At Christmas 2006, the deceased sent Mrs Burbidge a note saying “Sue thank you for looking [after] my affairs, I don’t know how I would have got on without you”.
On 13th March 2007, Mr Pick visited the deceased at No 7 (with Mrs Burbidge present) to take instructions for her new will. He recorded that the deceased “had clearly come out of herself since the death of her husband and she was quite strong in her views”, and that she “was really quite hurt because she had little or no contact now from Ken or Paul” and “the people who had been good to her were her brothers and sisters …”. She told Mr Pick that she wanted to change the disposition of No 43 so as to leave it to her surviving siblings and grandchildren, and to leave the residue of her estate to Mrs Burbidge. Mr Pick advised that, in view of the proposed changed disposition in respect of No 43, the residue should be left equally amongst her children.
On 26th April 2007, the deceased made her last will (the “2007 will”), leaving No 43 to her Samways siblings (the first 3 claimants in the Samways claim, together with the deceased’s twin sister, Ms Ada Samways (universally known as “Joan”)) together with any of her grandchildren living at the date of her death, leaving No 7 to the Harts, and the residue to be divided equally between the Harts and Mrs Burbidge. She executed the 2007 will having seen Mr Pick alone in the absence of Mrs Burbidge.
In July 2007, the deceased expressed a wish to move in with Mr and Mrs Burbidge. They looked for a house to enable this to happen, since their own property at Lytchett Matravers was apparently unsuitable for this purpose. They eventually saw Little Manor. The judge found that there was no reason to doubt that the deceased was very keen, once she had seen it, to live at Little Manor and “to this end, [to] make the necessary monies available to enable this to happen”.
On 13th February 2008, the deceased and Mr and Mrs Burbidge met Mr Pick to discuss the proposed purchase of Little Manor. The judge found Mr Pick’s note of this meeting (as with all the other meetings) to be accurate. In essence, it recorded the deceased’s dissatisfaction with the Harts and the fact that Mr and Mrs Burbidge did everything for her. It said that Mr and Mrs Burbidge wished to buy Little Manor, though it would be financed by the sale of Mr and Mrs Burbidge’s property (worth some £280,000), the sales of No 7 and No 43, and the deceased’s cash of £290,000 (the judge found that this last suggestion emanated from Mrs Burbidge). The note recorded that Mrs Burbidge “would want to honour payments to Ken and Paul, brothers and sisters and grandchildren [in the 2007 will] for the amount received for the sale of [No 7 and No 43]”. It continued: “[Mr Pick] confirmed that if the new property was just purchased in [Mr and Mrs Burbidge’s] name this would not be practical. The only way to secure it would be, for example, for the property to be bought so that [Mr and Mrs Burbidge] owned say, 50% and [the deceased] owned 50% as tenants in common”. Mr Pick confirmed this advice in writing on 14th February 2008. The judge found that there was no reason to doubt the deceased’s disenchantment with the Harts, her determination to let Mrs Burbidge have the £290,000 or her wish to join Mr and Mrs Burbidge in buying Little Manor (paragraph 80). The judge found that the deceased had not said at this meeting that she did not wish to be on the title to Little Manor or that she feared that, if she were, the Harts might get their hands on the property. Finally, in relation to this meeting, the judge accepted Mr Pick’s evidence that the need to change the 2007 will had been raised by him as something that would be appropriate if the matter proceeded as was then proposed; there was no indication that the deceased wished to change her will there and then (paragraph 81).
A few days after the meeting and Mr Pick’s follow up letter, in February 2008, Mrs Burbidge telephoned Mr Pick to say that his letter (which advised that Little Manor should be put in joint names) basically confirmed the agreement which they had reached, but that there were “one or two small points … but nothing fundamental”, and that she would let him know when anything changed or sales had been agreed. Mr Pick’s firm dealt with Mrs Burbidge as the person looking after the deceased’s affairs in relation to the sales of No 7 and No 43.
On 21st February 2008, the deceased transferred the sum of £290,000 from her account at the Teachers Building Society to a joint account in the name of Mr and Mrs Burbidge as a gift.
In March 2008, Mr Paul Hart became aware of the proposed transactions. The judge found that he made two visits to the deceased in which he badgered her and recorded his conversations with her (paragraphs 85-6). The judge also found that Mrs Burbidge had made out to Mr Paul Hart that the new property would be put partly in the deceased’s name, and that Mr and Mrs Burbidge’s property was to be sold. Neither occurred in fact. We were shown these transcripts in the course of argument. It was noteworthy that the deceased repeatedly said that she was “sick to death” of the discussion about the properties and inheritance, but also that it was her understanding, as she put it, that “they’re gonna have my name on the doings”, in reference to the purchase of Little Manor.
On 8th May 2008, the deceased and Mrs Burbidge again saw Mr Pick. Again, he made a detailed note. The details of what was actually proposed were explained to Mr Pick, except that it was said that each of the deceased and Mr and Mrs Burbidge would have a 50% interest in the new property. Mr Pick recorded that it did not “sit comfortably with him” making substantially greater provision for one of three children, even though one did everything and the others did little or nothing. However, he wrote that the deceased had come out of herself after her husband had died and she did get on well with Mrs Burbidge and “one could see that it made sense for her to live with them”.
On 12th May 2008, the deceased rang Mr Pick’s office in advance of a meeting with Mr Paul Hart to tell Mr Pick not to mention the “Teachers monies” (i.e. the £290,000 gift) to Mr Paul Hart. Mr Pick’s note of the meeting records that he met both the Harts, who expressed their concern about Mrs Burbidge’s influence over their mother, and said that Mrs Burbidge dominated her mother’s life and was feathering her own nest. They told Mr Pick that they had always been advised that they would split No 7 and No 43 in return for Mrs Burbidge having had Unit 15. Mr Pick told the Harts that he could only advise the deceased, that his firm felt that she was firm in her views, and that she was perfectly capable of making decisions with the assets she had at her disposal. Mr Pick informed the Harts about the intended transaction and that the deceased would own half of the new property.
On 14th May 2008, Mr Pick wrote what the judge described as an important letter to the deceased setting out his obvious unhappiness with what she was proposing. He recorded the essential elements of his meeting with the Harts, and said that they were concerned to ensure that if a new property were purchased on a 50/50 basis, that Mr and Mrs Burbidge actually put in their 50%. Mr Pick said he too wanted them to do so, and expressed concern that the deceased would effectively be putting in all the monies. He did not think that was a good, fair or equitable idea “but the decision at the end of the day will naturally be yours”. He advised the deceased to take a larger percentage of the new property, as she was effectively giving them a gift of a further £350,000 on top of Unit 15. He said she was burning her bridges. He asked if this is what her husband would have wanted, and suggested being perfectly open with the Harts, and holding a round table meeting.
Finally on the 20th May 2008, there was a telephone conversation between the deceased, Mr Pick and Mrs Burbidge in which, as the judge found (paragraph 96), Mrs Burbidge shouted and was angry and aggressive because she felt that Mr Pick was taking the Harts’s side. The deceased said she would make whatever decisions she wanted, and Mr Pick asked Mrs Burbidge to get her solicitors (Blanchards) to write to him with their proposals. They did not do so, but he chased up his request with a letter to the deceased on 27th August 2008. Mr Pick’s conveyancing department continued to be involved in the sales of No 7 and No 43, but not in relation to the purchase of Little Manor. On 3rd June 2008, Mr and Mrs Burbidge exchanged contracts for the purchase of Little Manor.
On 6th June 2008, the deceased sold No 7 for £249,500 and transferred the net proceeds of the sale of some £244,000 to Mr and Mrs Burbidge. On 8th August 2008, the deceased sold No 43 for £170,000 and transferred the net proceeds of the sale of £166,345 to Mr and Mrs Burbidge. Mr and Mrs Burbidge contended that these payments were loans (said to total £410,000) from the deceased to them, but it was accepted that there was no documentation except an unsigned memorandum of acknowledgement, produced after the deceased’s death. That document referred to a loan of £400,000 (not £410,000), showed that no interest was payable on the loan, and that the loan was not repayable during the deceased’s lifetime, but only within one year of her death.
As the judge found, the deceased lived with Mr and Mrs Burbidge in their house at Lytchett Matravers between the beginning of June 2008 and early October 2008.
On 7th September 2008, the judge found that Mrs Burbidge drafted and typed out a significant letter for the deceased to sign and send to Mr Pick (in answer to his chaser of 27th August 2008) which she did (paragraph 100). The letter said that the deceased was living with Mr and Mrs Burbidge, but said dishonestly (on the part of Mrs Burbidge) that their solicitors had confirmed that they would be writing to Mr Pick (concerning the purchase of Little Manor), when in fact they had not been asked to do so. The judge found that Mrs Burbidge’s motive can only have been to avoid involving Mr Pick in the investment of the sale proceeds of No 7 and No 43 in the purchase of Little Manor, and that the only plausible reason for keeping Mr Pick out of the way was to prevent him advising the deceased on the need to structure the purchase of Little Manor so as to protect her interests. The judge also held, in a critical part of his reasoning, that it was not unreasonable to suppose that either the deceased was actively misled by Mrs Burbidge about the true position, or she was accustomed to leaving matters concerned with property and finance to Mrs Burbidge to deal with and was happy to sign what Mrs Burbidge put in front of her (paragraph 101). The judge found that the letter was drafted with an eye to a trouble-free completion of the purchase of Little Manor.
On 6th October 2008, Mr and Mrs Burbidge duly completed the purchase of Little Manor for £700,000. The purchase was funded entirely by the monies they had received from the deceased, but the property was placed into the sole names of Mr and Mrs Burbidge. On 7th October 2008, the deceased and her twin sister, Ms Joan Samways, moved in to Little Manor. They were visited almost daily by Mr and Mrs Burbidge. But a few days later, the deceased fell ill and went into hospital.
On 7th November 2008, the deceased died, followed a month later by her twin sister. The deceased left assets of £51,000, a liability of £24,000 for capital gains tax on No 43 and the undocumented promise by Mr and Mrs Burbidge to repay her the proceeds of sale of No 7 and No 43 totalling £410,000.
The deceased’s death caused Mr and Mrs Burbidge to change their plans, and on 15th July 2009 they sold Little Manor for £595,000, from which they paid £410,000 to the executor of the deceased by way of repayment of the loan.
On 4th August 2009, probate of the deceased’s 2007 will was granted to Mr Pick. If no adjustments were to be made to the distribution of the estate, the judge held that Mrs Burbidge and the Harts would each receive approximately £70,000 from the deceased’s residuary estate.
In March 2011, the two sets of proceedings were issued. On 12th June 2013, the judge handed down judgment after an 8-day trial that took place between the 26th February and 13th March 2013, and the judge granted no extension of time for making any application for permission to appeal. After the judgment was delivered, Mr and Mrs Burbidge ceased to be represented on about 19th July 2013, though they put in submissions that had apparently been drafted for them by lawyers for the ‘consequentials’ hearing that eventually took place before the judge on 23rd July 2013. Mr and Mrs Burbidge did not attend and were not represented at that hearing.
23rd July 2013 was the date of the judge’s eventual order. It declared that the impugned transactions were procured by the undue influence of Mrs Burbidge over the deceased, and that Mr and Mrs Burbidge were to compensate the claimants for the monetary value that they would have received, free of inheritance tax, if respectively No 7 and No 43 had “formed part of the [deceased’s] estate at the date of her death and had been sold and the proceeds of sale of [each] specific gift had been distributed to them”. The order then provided that Mr and Mrs Burbidge were jointly and severally liable to the Hart claimants for a sufficient sum as after tax they would have received by way of residue if the deceased had still had the £290,000 transferred from the Teachers’ Building Society at the date of her death, although such sums were to be paid to the executor of the deceased. Similar orders were made in relation to the proceeds of No 7 and No 43, and the order then set out specific sums of money, amounts of interest, and sums in respect of tax that had to be paid by Mr and Mrs Burbidge to the executor of the deceased’s estate to achieve this effect. In respect of costs, the judge ordered, in outline, that Mr and Mrs Burbidge should pay 95% of the costs of the actions, payments on account, and that they should pay the costs of the executor of the estate of the deceased as a result of the dispute provisionally assessed at £22,090.75. Finally, the judge ordered that Mr and Mrs Burbidge’s application for permission to appeal was out of time, but had it been in time, it would have been refused.
On 14th August 2013, Mr and Mrs Burbidge filed their Appellants’ Notices. On 23rd August 2013, the claimants’ solicitors were served with copies of the Appellants’ Notices. On 2nd September 2013, the solicitors acting for all the claimants wrote to the court asking that it note that the applications for permission to appeal were out of time, and saying that they wished to make representations “[i]f the court were minded to consider using its powers under CPR 52.6 retrospectively to extend the time in which the appellants’ notices are to be filed”.
On 30th December 2013, Lewison LJ granted Mr and Mrs Burbidge permission to appeal, but did not expressly say that he was extending time for the filing of the Appellants’ Notices.
The judge’s decision
The judge summarised the relevant law on undue influence at paragraphs 37-52 of his careful judgment. He then applied the law to the facts at paragraphs 109-133, and dealt with the appropriate relief at paragraphs 141-144.
The judge held that the relationship between Mrs Burbidge and the deceased after her husband’s death was exactly described by “trust and confidence, reliance and dependence”, as those words had been used by Lord Nicholls at paragraph 11 in Royal Bank of Scotland plc v. Etridge (No 2)[2002] 2 AC 773 – see paragraphs 111-116.
The judge then held at paragraphs 121-123 that the impugned transactions clearly called for an explanation. It is worth citing a part of his reasoning as follows:-
“[121] There is no challenge to the gift by [the deceased] to [Mr and Mrs Burbidge] of Unit 15 and the release of the outstanding indebtedness, together worth £319,000. But the fact that they were made and that so soon after [the deceased] made over to [Mr and Mrs Burbidge] all but a small part of the property that remained to her clearly calls for an explanation. This is especially so when the effect of so doing was also to frustrate the specific gifts in favour of her two sons and the Samways parties (and Joan) in a will executed only months earlier, and (unless the £410,000 was repaid) greatly to reduce the value of her residuary estate.
[122] The transfer to [Mr and Mrs Burbidge] of the £290,000 in February 2008 took place without [the deceased] obtaining any prior advice. The proposal to use that money and the sale proceeds of Nos 7 and 43 in the purchase of Little Manor was contrary to the advice that Mr Pick gave to her in May 2008. The subsequent application of those monies in that purchase and the manner in which they were applied (in return for no interest in or security over the property) occurred without [the deceased] receiving the advice of any solicitor, whether Mr Pick or someone else, or from any other independent adviser. She was 86 when all of this happened”.
The judge then held that the burden shifted to Mrs Burbidge to rebut the presumption of undue influence that arose. He had referred at paragraph 42 of his judgment to paragraph 15 of Buxton LJ’s judgment in Turkey v. Awadh [2005] EWCA Civ 382 in which he had said that “[i]f on the evidence the transaction cannot so be explained – that is to say, the transaction calls for an explanation and that explanation is not forthcoming – the burden then shifts to the Claimant to show that in fact, and despite the terms and nature of the agreement, he did not in truth abuse the position that he held”. Despite having referred to this passage, the judge did not ask himself whether a satisfactory explanation for the impugned transactions had been forthcoming before moving to consider whether Mr and Mrs Burbidge had rebutted the presumption of undue influence that he held had arisen.
In paragraphs 124-133, he held that Mrs Burbidge had failed to rebut that presumption, so that the claim succeeded. He was not persuaded on the evidence that the deceased was acting fully independently of the undue influence, or that she really understood: “the many letters that went out under her signature … what interest if any she would be acquiring in Little Manor and generally what rights she should have or should consider having to secure her interests in the monies she was transferring to [Mr and Mrs Burbidge] … [nor whether the deceased] intended by her actions to deprive her two sons and the others of the legacies given to them by the 2007 Will …”. The judge was not persuaded that the deceased had any satisfactory independent advice, nor that Mrs Burbidge had given any coherent explanation as to why the deceased’s name was not on the title to Little Manor or as to why there was no documentation as to the loan of the proceeds of sale of No 7 and No 43.
As regards relief, the judge held that there could be no grounds for setting aside the various sales to third parties, but that the deceased’s estate should be put, as I have already said, in the position it would have been had there been no undue influence.
The judge held Mr Burbidge liable for the same sums as Mrs Burbidge as one who had been unjustly enriched by the undue influence, but not as a constructive trustee. He said that Mr Burbidge “shared equally with Susan in the benefits which resulted from Susan’s undue influence over her mother with full knowledge of the fact that the two of them were in a relationship of influence”.
Grounds of Appeal
Mr and Mrs Burbidge’s grounds of appeal, as explained in oral argument, may be briefly summarised as follows:-
i) The judge was wrong to find that Mr Burbidge was liable in unjust enrichment, since the only allegation that was pleaded was that he was a constructive trustee, which the judge rejected.
ii) The judge ought not to have made any findings about quantum since the parties had agreed that further submissions on quantum would be made after judgment.
iii) The judge was wrong to hold that the sales of No 7 and No 43 and the gift of £290,000 disadvantaged the deceased, when in fact they were to her advantage in a falling market and were for her benefit in that she wanted to move in with Mr and Mrs Burbidge. The judge ought to have found that there was a perfectly proper explanation for the impugned transactions, so that the stage at which the burden of proof shifted ought never to have been reached.
iv) The judge was wrong to find that Mrs Burbidge had failed to rebut the presumption of undue influence in respect of the gift of £290,000, and should have found that this transaction did not call for any explanation, and had the perfectly proper motivation of keeping the money out of the hands of the Harts, with whom the deceased had fallen out.
v) The judge was wrong to find that Mrs Burbidge had failed to rebut the presumption of undue influence in respect of the sales of No 7 and No 43 and the purchase of Little Manor, and should have found that these transactions did not call for any explanation, because the deceased was desperate to live with Mrs Burbidge and avoid the unpleasant attentions of the Harts.
vi) The judge approached quantum in the wrong way, ignoring the facts that (i) the deceased intended to change her will to exclude the Harts, (ii) the Harts had behaved in such a way as equity would not assist them, and (iii) the deceased was better protected by a loan agreement than by an interest in Little Manor. In addition, the judge ought not to have used the sale proceeds of No 7 and No 43 in the calculation of appropriate compensation, because, if there had been no undue influence, those properties would have been sold later after the deceased died for less money.
vii) The judge was wrong to order that Mr and Mrs Burbidge should pay as much as 95% of the claimants’ costs, and ought not to have required them to pay the costs of the non-party executor.
By their Respondents’ Notice, all the claimants applied to set aside the grant of permission to appeal on the grounds that the Appellants’ Notices were filed 6 weeks late, and the skeleton argument was misleading. On 15th May 2013, Lewison LJ declined to set aside the permission to appeal, and adjourned the question of an extension of time to the full appeal. The claimants argued that an extension of time ought not to have been granted because the dicta of Brooke LJ at paragraph 21 in Sayers v. Clarke Walker [2002] 3 All ER 490 required the court to have regard to the criteria for the grant of relief from sanctions under CPR Part 3.9 when considering such an extension.
Ground 1: Claims against Mr Burbidge
Mr Burbidge contends that the judge ignored the pleaded and agreed issues between the parties as to Mr Burbidge’s liability. He says that the claimants pleaded that Mr Burbidge was a constructive trustee as a result of his presumed knowledge of the undue influence and his intention to benefit from it, and that the parties agreed that the judge should decide whether Mr Burbidge had “the requisite knowledge for the purposes of being a knowing recipient of the £290,000 gift and the sale proceeds” of No 7 and No 43.
In fact, however, the pleaded case against Mr Burbidge was that he was (i) a person intended by Mrs Burbidge to benefit from the transactions, (ii) to be attributed with knowledge of the undue influence, and (iii) liable to account for the benefits received. Moreover, the judge held, as I have said, that Mr Burbidge shared equally with Mrs Burbidge in the benefits which resulted from her undue influence over her mother with full knowledge of the fact of the relationship of influence. As a result, he held that Mr Burbidge was also obliged to restore the deceased’s estate to the position it would have been in had the impugned transactions not occurred.
I take the view that Mr Burbidge’s argument is flawed, because the judge merely stated at the end of his judgment that he considered that the juridical basis of the grant of relief in respect of transactions impugned by undue influence was unjust enrichment. In my judgment, he was right. That is perhaps demonstrated by the fact that the learned editors of Goff & Jones on the Law of Unjust Enrichment 8th edition, 2011, have seen fit to include an entire Chapter (11) on “Undue Influence and Unconscionable Bargains”. Pleadings should generally include facts not law, and the court is not always constrained by the legal issues that the parties agree for determination. Here, the judge found, in effect, that the criteria for a claim in unjust enrichment were made out against Mr Burbidge, in that he had been enriched at the expense of the claimants, and that that enrichment was unjust. A change of position defence was not advanced.
At one stage, Mr Paul Emerson, counsel for Mr and Mrs Burbidge, suggested that there was no basis for the judge’s finding that Mr Burbidge knew of the relationship of influence. I can fully understand why he did not pursue that argument on the facts, since the judge had ample grounds for reaching the conclusion as to knowledge that he did. It is to be noted, however, that no argument was addressed as to whether lack of knowledge would anyway have been a defence to an unjust enrichment claim against Mr Burbidge. The point can await decision in a case in which it arises directly.
Ground 2: Deciding quantum without argument
Mr and Mrs Burbidge argue that there was an agreement between the parties that quantum would be the subject of further argument after judgment. But that agreement was not, on their own admission, accepted by all counsel at the trial. Ms Rosanna Foskett, who appeared for the Samway claimants before the judge (but not before us), told the judge that quantum was not addressed in detail “but that’s not on the basis to my recollection of any understanding that it would be hived off or specifically not dealt with”.
In my judgment, there is no basis to conclude that the judge was wrong to consider the relief that was appropriate alongside liability in his main judgment.
Ground 3: Did the impugned transactions require an explanation?
The main contention under this ground of appeal is that the judge treated all three transactions as part of a single process rather than considering each in turn. In essence, it is said that the gift of the £290,000 was quite separate from the sales of No 7 and No 43 and the purchase of Little Manor. The gift of £290,000 did not require an explanation and was “readily explicable by the relationship of the parties” (see paragraph 21 of Lord Nicholls’s speech in Etridge). It was said that the deceased had no need of the money, wanted to change her will to exclude the Harts, and to make the gift to Mrs Burbidge. The deceased had the benefit of legal advice at the time, and decided to make the gift anyway.
In my judgment, this point is misconceived. Whilst it is true that the gift of £290,000 was made in February 2008 before the sales of No 7 and No 43 were certain to take place, that does not mean that it was to be regarded in isolation. The reasons advanced for the gift in Mr Pick’s note of the 13th February 2008 meeting were because the deceased wanted Mrs Burbidge to have the money, but also to finance the intended purchase of Little Manor. Mr Pick did not advise the deceased to make the gift. He recorded that “there was nothing we could say to stop her doing it or make her change her mind”. It was nothing to do with any desire by the deceased to change the 2007 will as the judge recorded at paragraph 81. Indeed, Mr Pick’s reduced concern at that stage was only occasioned by his understanding that her contribution to Little Manor would be reflected in the title. Looked at in the round, the judge was entirely justified in finding that the gift of £290,000 called for an explanation. Disposing of almost the entirety of the deceased’s cash by way of gift would seem obviously to call for an explanation, since it deprived the deceased of security, an income, and the ability to live alone. It was not readily explicable by the relationship between the deceased and Mrs Burbidge, nor by the fact that she was fed up with the Harts.
As regards the transfer of the proceeds of No 7 and No 43, those transactions are said to have been advantageous to the deceased since the sales were made before the market fell still further, and she was protected by the loan agreement from her asset value falling by taking a share in Little Manor. This again takes a blinkered view of the exercise upon which the judge was engaged. It was only with the benefit of hindsight that the sales of No 7 and No 43 could be regarded as having been made at an advantageous time. Nobody knew at the time that the market would fall further. The terms of the so called loan to Mr and Mrs Burbidge were massively disadvantageous to the deceased as the judge found. No interest was payable, and the loan was not repayable until after the deceased’s death. In short, these transactions called for an explanation on any basis. The deceased was giving up almost the entirety of her income in return for a place to stay with Mr and Mrs Burbidge that might or might not prove satisfactory. She would have had no money to pay for medical attention or care facilities should she have needed them in the future. The fact that the deceased was not to take a share in Little Manor made the whole arrangement even more disadvantageous to the deceased, which was why Mr Pick was so keen to point out the need for her interest to be secured, and why he was eventually cut out of the loop by the dishonesty of Mrs Burbidge. Again the transactions were not readily explicable by the relationship between the deceased and Mrs Burbidge, nor by the fact that she was fed up with the Harts.
The next question is whether the judge ought to have considered whether there was a reasonable explanation for the impugned transactions, before moving to consider the rebuttal of the presumption, in accordance with the dicta of Buxton LJ in Turkey v. Awadh to which I have already referred. It is possible to understand why, on the facts of Turkey v. Awadh, both Buxton and Chadwick LJJ thought that the “transaction, looked at as a whole, [could] be explained in terms other than those of undue influence” (see paragraph 20 of Buxton LJ). What they were saying, in effect, was that the exercise of identifying whether the transaction called for an explanation also involved determining whether it was “readily explicable by the relationship of the parties” (in the words of Lord Nicholls at paragraph 21 in Etridge) or “explained by reference to the ordinary motives by which people are accustomed to act” (in the words of Lord Scott in Etridge at paragraph 220). Put another way, if the transaction called for an explanation and a reasonable explanation was available which did not involve undue influence, then the court was justified in not proceeding to the reversal of the burden of proof or the rebuttal of the presumption that would otherwise arise.
In this case, no such reasonable explanation was available. For the reasons I have given, the impugned transactions all called for an explanation, and the explanations offered called clearly into question whether or not the transactions were indeed the product of the relationship of influence that had already been established. Accordingly, the judge was right to move to consider whether the presumption had been rebutted.
Ground 4: Rebuttal of the presumption in respect of the gift of £290,000
Here again it is said that the judge did not properly consider the individual circumstances of the gift of £290,000 separately from the entire transaction that later occurred. For the reasons that I have given, I think he was justified in treating all the impugned transactions together. As he said in paragraph 126 of his judgment: “through no fault of Mr Pick, no independent advice was given to [the deceased] about whether it was in her best interests or even sensible to transfer to [Mr and Mrs Burbidge] over 90% of her estate”. The deceased did not need to do so in order to live with Mr and Mrs Burbidge. She did not need to do so in order to change her will to reduce the inheritance of the Harts, whose conduct had upset her.
The truth, as the judge found, was that the gift of £290,000 together with the other impugned transactions left the deceased with no fall back position if living with Mr and Mrs Burbidge did not work out and with no income apart from her state pension and minimal interest.
The problem for Mr and Mrs Burbidge is that the judge was right to think that no coherent explanation was offered as to why the deceased was not given an interest in Little Manor, even though she had paid for it in its entirety, and why there was no formal loan agreement secured on the property and repayable on normal terms during her lifetime. The judge was right to think that the fact that the deceased might have “come out of herself” since her husband died did not mean that she was acting wholly independently of Mrs Burbidge’s influence in entering into these unnecessary and inappropriate transactions. The gift of £290,000 was just the start, but had to be seen as part of an entire process.
In my judgment, the judge was right to find that Mrs Burbidge had failed to rebut the presumption of undue influence in relation to the gift of £290,000.
Ground 5: Rebuttal of the presumption in respect of the sales of No7 and No 43
Under this head, Mr and Mrs Burbidge argue that the judge ought to have concluded that the sales of No 7 and No 43, the loan agreement as to the proceeds and the purchase of Little Manor were transactions that the deceased much desired and entered into of her own free will. She wanted to free herself of the unwelcome attentions of the Harts, she wanted to live at Little Manor with Mr and Mrs Burbidge, and she was a strong woman who knew her own mind.
Largely for the reasons I have already given, the judge’s reasoning on this aspect of the case is, in my judgment overwhelming. He found that the deceased did not understand that she was in the process of giving away her entire wealth without any security, that she would be without income or capital if living with Mr and Mrs Burbidge did not work out, and she was deprived of proper legal advice by the dishonest device instigated and executed by Mrs Burbidge.
The sales of No 7 and No 43 were not advantageous to the deceased, because the proceeds were loaned to Mr and Mrs Burbidge on such disadvantageous terms, and the replacement property was put in their names. In my judgment, the judge was right to find that the presumption that these transactions were brought about by the influence of Mrs Burbidge was not rebutted.
Ground 6: The relief granted
The first issue here is said to be the effect of the new will that the deceased had wished to make once she had moved in to Little Manor to exclude the Harts. Taking that into account, the judge ought not to have made an order that sought to put the Harts back into the position they would have been in had the 2007 will taken its natural course. There is, in my judgment, no merit in this contention, since the judge found that the deceased had no immediate desire to make a new will. Indeed, the suggestion to do so was Mr Pick’s and was made in order to restore the balance if the transactions went ahead.
The second issue raised is as to whether the judge, in granting relief, ought to have made an allowance for the bad conduct of the Harts towards their mother. Whilst it is clear that the deceased was very upset by her sons’ conduct towards her, I cannot see that this could or should have affected the relief that the judge granted. The deceased could have changed her will, but chose not to do so. The judge was required to provide the proper relief for the undue influence that he had found to have occurred in respect of the impugned transactions. That is what he did, and he was correct to do so.
The third issue concerns the suggestion that the deceased was better protected by a loan agreement than by an interest in Little Manor in a falling market. As I have said, this argument operates only with the benefit of hindsight. Nobody knew that the market would continue to fall, nor when the deceased would die. Moreover, even if the deceased might have been better protected by a properly secured loan agreement to Mr and Mrs Burbidge with the loan repayable on demand, she was certainly far worse off with the informal undocumented arrangement she actually received.
Finally under this ground of appeal, Mr and Mrs Burbidge complain again that all the claimants were better off as a result of No 7 and No 43 having been sold before the continuing fall in the market. The judge compensated the claimants on the basis of the sale proceeds of No 7 and No 43, which were sold in mid-2008, whereas he had also held that, absent undue influence, the properties would have been sold in the course of the administration of the deceased’s estate in 2009, when the values would have fallen (though no expert evidence was available as to the precise values of No 7 and No 43 at that time).
Mr Charles Auld, counsel for the claimants, submits in response to this point that it was up to Mr and Mrs Burbidge to adduce evidence of the values of No 7 and No 43 had they been sold later, and that in the absence of such evidence, the judge was justified in taking the same values. He also pointed to the fact that the properties were sold at the lower end of the +/- 5% range of values that the expert had given, and that it had been the Harts’ position that at least No 7 might have been retained by them in specie, had the legacy in their favour taken effect.
In my judgment, there was a prima facie inconsistency between the judge deciding that the properties would, absent the undue influence, have been sold during the executor’s year, and then compensating the claimants on the basis of the values at which they were sold about a year earlier, particularly as the evidence before the court was that the market generally fell in that period by around 10-15%. The problem, however, is that the judge was totally alive to the valuation issues having heard considerable expert evidence and seen a lengthy report. He had seen 2 graphs of house price indices in the relevant area showing the low point in the market at about February 2009, with houses rising again to mid to late 2008 values by late 2009. The deceased died in November 2008. The properties could have been sold within the executor’s year in November 2009. It is a matter of pure speculation to say that they would have been sold for less than they were in mid-2008. The evidence that the judge did have, in my judgment, justified him in concluding that it was reasonable to take the actual sale prices, which were anyway admittedly on the low side, as the values at which the properties would have been sold after the deceased died.
Ground 7: Costs
The first point in relation to the costs relates to the judge’s assessment that Mr and Mrs Burbidge should pay 95% of both sets of claimants’ costs. They argue that this evaluation failed to take proper account under CPR Part 44.2 (as it now is) of the fact that the claimants lost significant claims for (a) actual undue influence (b) breach of fiduciary duty, and (c) breach of common law duties. In my judgment, however, the judge was best placed to make this assessment. He said expressly in his costs decision that he did not think that the costs had been materially increased by these allegations. Moreover, he did make an allowance of 5% for the unnecessary expert evidence. I do not think that this court can second guess the decision of an experienced judge who sat through the entire trial on this kind of question. He must know best how much time was actually taken up with the failed legal issues. The decision as to the percentage of costs was, in my judgment, one he was entitled to make.
In relation to the executor’s costs, Mr Emerson submitted that the executor had not asked for his costs and had not enforced the order. But, as Mr Auld pointed out, that was because he had simply taken his costs from the estate of the deceased, thus reducing the inheritance of the Hart claimants. I cannot see why the judge was not entitled to hold, as he did, that the executor’s costs incurred as a result of this litigation, should be borne by Mr and Mrs Burbidge. They were a direct result of the undue influence that he found proved and the litigation that Mr and Mrs Burbidge have lost.
Should the grant of permission to appeal be set aside?
It was implicit in Lewison LJ’s grant of permission to appeal that he also granted the necessary extensions of time requested in the Appellants’ Notices. The members of the court expressed a unanimous view in the course of argument that they too would have extended time for the filing of the Appellants’ Notices had they been granting permission to appeal on paper. This expression of opinion did not dissuade Mr Auld from pursuing this aspect of his Respondents’ Notice, because he said that confusion existed as to whether the dictum in Sayers v. Clarke Walker, to which I have referred, remains good law after the change in the provisions of CPR Part 3.9 in April 2013, and the very recent decision in Denton v TH White Limited [2014] EWCA Civ 906. In my judgment, it cannot any longer be right to say that the court should have regard to the lengthy list of factors in the old CPR Part 3.9(1) when considering whether to grant permission to extend time for the filing of an Appellant’s Notice. It would be inappropriate, however, to comment in the absence of full argument, on whether the new approach to applications for relief from sanctions set out in Denton is properly to be regarded as relevant to an extension of time in these circumstances. That too must await another case. I can say, however, that the court in Denton sought to discourage satellite litigation of all kinds, and to encourage parties to agree to reasonable requests for extensions under the new CPR Part 3.8(4). In this case, the delay was justified since Mr and Mrs Burbidge needed time to consider the complex order actually made by the judge on 23rd July 2013 in drafting their Grounds of Appeal. Lewison LJ must be taken to have considered that point. In my judgment, there are no grounds to set aside the extension of time he granted.
Conclusions and disposal
For the reasons I have sought shortly to explain, the judge was in my judgment entirely justified in the findings he made and the relief he granted. I was, at one stage, somewhat concerned by the fact that the executor was never made a party to the proceedings, since the bulk of the relief granted involved payments being made to him. Since the point is technical and was not taken by any party, and the executor plainly knew of these proceedings and did not wish to participate, I do not think the point can vitiate the entirely appropriate orders that the judge made.
In the circumstances, I would refuse to set aside the permission to extend time for the Appellants’ Notices that was granted by Lewison LJ, and dismiss the appeal.
Lady Justice Black:
I agree.
Lord Justice Richards:
I also agree.
Hopkins v Hopkins
[2015] EWHC 812
Mr CUSWORTH QC :
Mr and Mrs Hopkins were married on 18th April 2009. They separated in August or September 2011, and Mrs Hopkins has told me that as far as she was concerned, their marriage was effectively over some 6 months earlier than that. These proceedings began in January 2013, and have now cost the parties a combined figure of £758,654. In addition to the provision contained in an agreement which they signed in August 2011, and which she has received but for the implementation of an agreed pension sharing order, Mrs Hopkins sought by her position statement a further £2million. Her husband offers her a sum of £200,000 in addition to such provision. Thus, at trial, in purely financial terms, their costs have taken up over 42% of the issue, between the parties.
The reason for this unhappy situation is that the parties’ August 2011 agreement, which describes itself as ‘Post-Nuptial’, purports to limit and define appropriate provision in the event of marital breakdown between the parties. It was an agreement arrived at between them in principle in the spring of 2011, just over 5 months after the landmark decision of Radmacher (formerly Granatino) v Granatino [2010] UKSC 427 was handed down in the Supreme Court. It is Mrs Hopkins’ case that this agreement ‘is vitiated by duress; alternatively unconscionable conduct such as undue pressure (falling short of duress); alternatively other unworthy conduct, such as exploitation of a dominant position to secure unfair advantage’. The court is asked to take into account Mrs Hopkins’ ’emotional state and what pressures she was under to agree’. Her Counsel also argue questions of fairness and need that will be dealt with later.
Thus it will be clear that the background to the making of this agreement, and the circumstances of the whole relationship between the parties that preceded it, have of necessity been the subject of close scrutiny over the course of the 3 days of evidence and 3 hours of closing submissions which I have heard. Both parties have given evidence to me and were in court throughout. I have also had the opportunity of reading a transcript of the entirety of the wife’s evidence, which was provided to me by Counsel after the conclusion of their submissions. Neither party called any other witness to support their respective cases, which has meant that I have no reason to doubt or challenge any of the statements or assertions made by others and recorded in the case papers before me. The detailed background is helpfully set out in an agreed chronology which runs to some 20 pages. What I set out here is only what seems to me the most pertinent to the issues which I have had to decide.
Relevant Background. Mr Hopkins (whom I shall refer to as ‘the husband’ for the rest of this judgment), is 66, and Mrs Hopkins (‘the wife’) is 62. They have known each other for a long time. They first met when the husband was around 28 and the wife 25, and were both then otherwise married and with young children from those relationships. They commenced what the wife’s former solicitor has described as a ‘clandestine’ affair, at a time when the husband was still living with his first wife and the wife was living with another man, having separated from her first husband. During that relationship, the parties never cohabited, but did have a son, William, born on 7th September 1981. Both parties already had 2 older children each by that time in their respective marriages.
During 1981, while the wife was pregnant, the husband acquired a run-down house (91 Brook Street) in his sole name, for her and her children to live in. He also provided for some work to be done on the property. The wife also made a contribution to this. The relationship between them ended in 1982 or 1983, and the husband remained living with his then wife Anne. In 1986, the wife married for a second time, to a man named Peter Griffiths, who had moved into 91 Brook Street to live with her. That marriage was to last for 13 years, and produce one further child.
In January 1989, in circumstances which have been the subject of some dispute, title to 91 Brook Street passed from the husband to the wife and Mr Griffiths. At the time, on 4th January 1989, the wife signed a document which read, materially, as follows: ‘I… acknowledge that (the husband) has agreed by contract to sell to me and (Mr Griffiths) the property 91 Brook Street at the price of fifteen thousand pounds and I estimate its current market value to be in the region of sixty-five thousand pounds. I acknowledge on my own behalf and on behalf of my son William, that this gift is made in full and final settlement of any claim that I or my son William may have against (the husband).’ Whilst the husband maintains that this document properly reflects the agreement between them at the time, the wife now says that in fact a further cash payment was made.
Ten years later, in 1999, the wife separated from Mr Griffiths, and in 2000 she made contact with the husband again – asking for assistance to help fund Will’s tertiary education costs. At the end of that year, the parties went on holiday together and the husband separated from Anne, to whom he had by then been married to for some 29 years. During 2001, the parties began to cohabit together in a property, owned by one of the husband’s business concerns, called Lynwood. In that year the husband’s marriage to Anne is dissolved. In 2002, the wife’s marriage to Peter Griffiths is also dissolved. In November 2003, the parties moved into the husband’s former matrimonial home at Penselwood, near Wincanton, upon Anne vacating the property.
2½ years after this, in March 2006, it is accepted that the wife visited a matrimonial solicitor, Mr Stokes, and took some advice – the precise purpose and extent of which has been in dispute before me – but from which meeting a hand-written attendance note has been produced. She says that she sought advice about her position only in the event of the husband’s death at that point. The husband contends that the advice sought also covered her rights in the event of separation. The parties at that point were of course merely cohabiting.
In November 2008, the parties separated for a period of between 1 and 2 weeks when the wife left, and the husband wrote a letter to her in which he said: ‘I would count my blessings if you were to give me one last chance’. She evidently determined to do that, and the parties were reconciled, and subsequently married on 18th April 2009. In that same year the wife gifted her share in a property to her daughter by her first marriage, Samantha. She also provided the sum of £285,000 to the parties’ son William to enable to acquire a property in North London. This is money that she had realised from the renovation and sale of another property of hers. There has been an issue between the parties as to whether at the time this was intended to be a gift (as the wife says), or a loan.
Just over a year after their marriage, in July 2010, the wife returned to see Mr Stokes, and this time received a detailed letter of advice from him following their meeting, some 21 pages long, which covered the broad range of her entitlement, and was sent to her care of a friend’s address. Under the heading ‘Your Instructions’, Mr Stokes set out in that letter the following account of the situation as it then stood: ‘Notwithstanding your consultation with me in March 2006 and the advice I gave you, you separated from Mr Hopkins in November 2008, though your separation was brief, as he encouraged you to reconcile and be married in April 2009. By June 2010 your marriage was in difficulty, so that you and Mr Hopkins have discussed separation and its dissolution. Your discussion with him has prompted you to seek my further advice. You have asked me to advise you with regard to matrimonial causes and, prospectively, to represent you in them.’
Further in that letter Mr Stokes described as the wife’s ‘only significant asset’ ‘the loan which you have made to William of £300,000…William is expected to make arrangements soon…to repay about 2/3 of the loan with the balance being forgiven as part of a family arrangement, which you have made with Mr Hopkins’ concurrence.’ The husband does not accept that he was made aware of this arrangement, but does accept that he knew of the loan.
In the event, proceedings did not immediately follow. Mr Stokes sent a bill for work done in the following October, to which the wife responded by email on 24th November 2010. That email included the following: ‘Bill (the husband) never looks at my computer…I told Bill I’d spoken with you, which may well have been helpful! Possibly not if he’d known what you actually sent me. Remarkably Bill does tell me all the business details, which may have seemed unlikely to you the state I was in when I saw you. Things have changed since I came to see you. A combination of various changes…but we are both much happier.’
In early February 2011, the parties attended counselling sessions with 2 different counsellors, but these sessions proved unsuccessful. Subsequently, they both attended matrimonial solicitors, but the wife determined not to go back to Mr Stokes, but rather to see Mr Justin Martin, then of Poole & Co. He first saw her on 26th February. She does not appear to have told him about her previous visits to Mr Stokes. She did tell him about the loan to William, which she described as being in the sum of £285,000.
By that time, the husband had visited Baroness Shackleton at Payne Hicks Beach (PHB), on 23rd February 2011. On that day he gave instructions for the issuing of divorce proceedings in London, which were not immediately served. Before this, the husband had found a copy of the wife’s 2010 letter of advice from Mr Stokes in the family home whilst looking for the parties’ marriage certificate. His evidence is that he told the wife soon after that he had seen this document. On 28th February, the parties had discussions during which the husband suggested to the wife that they should consider entering into a Post-Nuptial Agreement (PNA).
The events which then followed during the month of March 2011 have proved to be pivotal in the chain of events which led to the eventual signing by the parties of a PNA in the following August. Put succinctly:
On 4th March, PHB wrote to Poole & Co in the following terms: ‘We understand that following some recent difficulties within the marriage, the parties have decided that it would be helpful to enter into a Post-Nuptial Agreement to regulate their financial affairs. Our instructions are that our client has agreed to transfer two properties and a car into your client’s sole name in full and final settlement of any claims she may have against our client in the future’. The listed properties have remained as the principal provision contained within the agreement which was eventually completed, with the addition of a pension share.
On 7th March, the wife went back to see Mr Martin, and on 8th he wrote to confirm that no financial agreement had in fact been reached. He indicated that the husband’s proposal would be considered in the light of the parties respective financial positions, following disclosure.
On 15th March, Mr Martin telephoned the wife, and recorded that she was ‘at a somewhat low ebb’ and ‘still recovering from the effects of flu’. ‘She said that her husband had been trying to persuade her to accept the terms of the original offer’ which she was inclined to do. Mr Martin advised her to seek disclosure first. He records that he ‘discussed the matter in full and Mrs Hopkins was pleased that we had spoken about this’. She agreed that he should speak further to PHB.
At 4.47pm on the same day, she sent an email in which she said that she had ‘thought long and hard, and really want to go with her original wishes, to agree to the settlement…’ The deal proposed now includes the two properties, the car and ‘seventy five thousand’. She continued: ‘I appreciate you would have wanted to realize more for me, but signing the post-nuptial settlement this way will be almost instantly achievable, and this is very important to me. Although I would not want to go into battle with Bill, I also do have a vested interest in staying ‘friends’, for my son’s sake if nothing else…’
On 16th March, the parties attended a counselling session with a new pair of counsellors, one male and one female.
On 17th March, the wife emailed Mr Martin and said: ‘I am sure you think I am so weak in agreeing to Bill’s post-nuptial settlement. But I am absolutely sure that this is the right thing to do now.’
On 18th March, Mr Martin wrote to the wife, setting out the factual instructions which she has received from her, including that the husband was a very wealthy man with assets probably exceeding £30m. He also recorded what the wife has told him of the advice which she understood the husband has received from PHB, and disagreed with that advice, questioning whether what was relayed was accurate. He stated his belief that ‘on a divorce a court would award you a lump sum equating to a significant proportion of Mr Hopkins’ assets, and maintenance…’ He told her that she should not make any decision until there had been proper financial disclosure. He said: ‘I fear that you may be being bullied by Mr Hopkins’. He concluded that he would proceed if so instructed but would ask the wife to acknowledge that this was against his advice.
On 21st March, the wife responded by email, saying: ‘You are completely right in what you say, I am still being intimidated. I also feel quite ill with flu and all this upset. Part of me just wants to get (out) or should I say run away, and feels fairly content with what he is offering me. The other side is saddened by his offer, and being advised by yourself and loved ones not to agree, and as you say neither you nor they are suggesting taking him to the cleaners. Bill puts such a plausible case of what his solicitor has advised, and saying if I’m expecting more, and he has to reveal his assets, he threatens court.’
On the same day she telephoned Mr Martin, and told him that there was no chance of a reconciliation. Mr Martin recorded that she also added that ‘there was no doubt… that she was being bullied. In fact Mr Hopkins, when they were discussing the finances on the last occasion, he got her by the throat physically.’ They agreed to proceed with a divorce. W had been staying with her brother in Gloucester since 18th March, and on this day she travelled to the parties’ son Will’s home in London.
On the following day, 22nd, Mr Martin wrote to PHB that as there had now been irretrievable marital breakdown, financial issues would need to be resolved as ancillary relief. This letter apparently crossed with one from PHB serving the husband’s divorce petition, and stating that the clients have now agreed that the marriage has broken down. They indicated that they were in the process of collating financial disclosure.
Both parties however attended a further counselling session on 24th March, 2 days later, with the joint team that they had attended on 16th, and on 28th March the wife telephoned her solicitors again to say that ‘there had been a number of discussions over the weekend, and as a result, they had agreed that the divorce was not proceeding and they would be proceeding along the Post Nuptial Agreement route’. The wife accepted that Mr Martin would be asking her to sign a disclaimer in this event. PHB confirmed to Mr Martin that their instructions were the same.
On 6th April 2011, PHB wrote setting out the proposed terms upon which they were instructed that the parties had agreed. The first paragraph read: ‘Our clients wish to attempt a reconciliation and will do so with the assistance of counselling.’ The terms of the agreement were then set out, with the wife receiving the 2 properties, the car, and a lump sum which had now increased to £350,000, payable only in the event of subsequent divorce.
On the very next day, when travelling together to the next arranged session of joint counselling, the wife told the husband that she anyway intended to leave him, whereupon the arranged session did not take place. However, on the same day the wife sent an email to Mr Martin wondering if he had yet received the letter containing proposed terms from PHB. She wrote ‘I am quite anxious to see it as you can imagine.’ When Mr Martin forwarded the letter of 6th April to her on the 8th, she replied after 1 hour and 11 minutes saying simply ‘I have read the attached and agree to it.’
One week later, on 15th April, the wife felt the need to contact Mr Martin, prompting him to confirm her agreement in principle to the husband’s proposal. She then sent an email recording her disappointment that the response had required her further contact. This is the first of a number emails which the wife asserts were in fact dictated to her by the husband, which allegation the husband denies. On 19th April a further chasing email was sent, asking to see correspondence before it was sent, any sent already, and those from PHB. Mr Martin confirmed by letter on the same day that he had had no contact since 6th April from PHB.
Both parties agree that on about 5th May they agreed to vary their agreement so that the lump sum provision on divorce was replaced by a pension share. On 9th May, PHB acknowledged Mr Martin’s letter of 15th April and indicated that they were in the process of drafting the PNA. This was eventually sent through on 6th June and forward to the wife on 7th. The parties then set about preparing the necessary financial disclosure with their respective solicitors. On 10th June the wife emailed Mr Martin to say: ‘As I have said before I am happy with the agreement, and really wish it to move forward to a conclusion as soon as possible.’ On 13th Mr Martin replied: ‘Until we have Bill’s disclosures we cannot complete the agreement and move the matter on.’
Meanwhile, the parties were continuing to discuss between them the issues which had soured their relationship. The husband says that this was with a view to seeing whether reconciliation remained a possibility – the wife says that it was merely, as far as she was concerned, with a view to enabling them to remain friends. During June 2011, the wife wrote a letter to the husband headed: ‘How Things Could Change!!’, and the matters set out included:
Stop controlling behaviour…
Learn by your mistakes…
Listening…
Being less selfish – doing things I want to do without resentment and try to show interest…If we don’t want to do what each other is doing, no problem…
If you can’t care for my family allow me to…
Stop thinking because you bring more into this relationship I am basically worthless…
The husband’s initial reply, sent on 17th June, provided his not-uncritical reaction. He stated:
I would like to be listened to and heard. I do have an opinion and interrupt me less.
I would like you to take up an interest…
Give me the choice of doing things with you, but if it’s not what I want to do, then respect my choice to do my own thing…
Discuss things with me if you know they affect me…
I will show much more respect for your family…
Stop dredging up the history of our relationship…
He concludes: ‘I love you so much and I am extremely sorry for the hurtful things I have said in anger – I will do my best to control myself in future – if there is one’
Later on the same day he sent a second letter, designed to supersede the first, headed ‘I Will Change – Believe Me Please’, in which he simply accepted all of the blame for the couple’s troubles, and said: ‘I will not bully you again’. This letter concluded: ‘Caroline, I still love you and if at some point you could ever give me another chance I would prove to you I can change and be a better person in our relationship and show you the love and attention such a wonderful lady deserves’
On 20th June Mr Martin wrote to the wife asking, amongst other things, for the date of the £285,000 loan to William. At a meeting later that day he recorded that ‘she reiterated…the gift of the property to William. The arrangement was that William would share his gift with (her daughters) Samantha and Henrietta.’
On 27th June, PHB sent through an updated version of the PNA with their client’s financial disclosure attached. On 1st July, Mr Martin told the wife by email that he would have to amend the deed to make it clear that he had not approved the terms of the agreement, and that he had advised her about this. The wife’s slightly intemperate response starts with an apology for being short with him that morning, and included: ‘You ask whether I am content for you to make amendments, well having looked at the draft many times and thought it through, I am happy for the draft to stay as it is’; and ‘I am sure your advice would be that I am entitled to more, but I am entirely happy with this settlement, as I have said to you previously’. It is her case that the husband dictated this, which he denies.
Importantly, Mr Martin responded on 2nd July making clear that he could not leave un-amended a draft which indicated that he was satisfied with its terms on the wife’s behalf, when he was not. He added: ‘All that is required is that I advise you what you could expect a court to award you on a divorce and to confirm that I have given you correct advice. If you then sign the agreement then it will be watertight.’
On 5th July, Mr Martin sent to the wife an opinion from specialist matrimonial Counsel, Alexander Thorpe. In that document he stated at paragraph [31]: ‘I do stress that the lengths to which those instructing me have gone in their attempt to inform W only strengthen the agreement in the eyes of the court, despite its unfairness. In short, this advice undermines any future attempt to challenge the agreement because of the clarity of the views expressed herein.’
On the following day, 6th July, the wife responded to Mr Martin, in another email she alleges the husband dictated for her, which allegation he again rejects. There she said: ‘I understand you are looking after your client’s best interest, but I feel you seem to be ignoring my instructions…I am happy with (the final settlement), albeit against your advice and I would like to sign the PNA and to give you the indemnity you require…we are still living together, having counselling and trying to resolve our differences… Counsel’s suggestions of huge rewards are of no interest to me, and I know I shall never challenge the PNA…’
On the evening of 6th July, the wife emailed again asking whether Mr Martin’s suggested amendments did not invalidate the whole agreement as excluding the fact that she had received legal advice. Again she says, and the husband denies, that he is the message’s true author. Mr Martin replied early the next morning just as the parties were leaving on separate holidays explaining the purpose of his changes. He confirmed: ‘The fact that you have been advised that the agreement is not fair to you does not invalidate the agreement. You are perfectly entitled to agree what you want. What makes it watertight is that you have been advised, not that you have followed that advice.’
These 6th and 7th July emails do appear to have been forwarded by the wife to the husband, and he accepts receiving the former. The latter, sent while he was in transit at an airport, he says that he does not remember seeing. In any event the parties both now spent time apart at separate holiday destinations, speaking briefly once or twice. The wife did not return until 1st August, when, according to Mr Martin’s attendance note she was ‘pretty insistent about calling in to execute the document.’ He continued: ‘I prepared the deed of disclaimer which she read carefully…Mrs Hopkins signed both the Post Nuptial Agreement and the Deed of Disclaimer and again was entirely comfortable with what she had done.’ Mr Martin confirmed that his bill included Alexander Thorpe’s fees.
Three days later, on 4th August, the wife telephoned, and as Mr Martin put it: ‘I explained that this was the point of no return and she agreed that I should date the document thus making it binding.’ He concluded: ‘I should say that Mrs Hopkins demeanour was entirely cool, calm and collected and I have absolutely no doubt that for whatever reason she wanted to do what she was doing in the full understanding of the consequences thereof.’
I have read and heard a significant amount of evidence about what happened between the parties in the following months up to late November 2012, nearly 16 months later, which appears to be the time at which the wife finally decided that she would seek to challenge the PNA. The parties physically separated in mid-August 2011. In September 2011, the husband says that there was a final episode of sexual relations between them, which the wife denies. In February 2012 the wife filed a further petition for divorce. On 26th June 2012 the wife signed, but did not send, a copy of a consent order prepared to reflect the PNA.
By October 2012, the wife was expressing herself to be upset that she had received all of what she felt were her possessions from the former matrimonial home, especially plants. On 12th she wrote to the husband that ‘you have still not sorted out my things … so I have not signed.’ On 24th October, Mr Martin was instructed by her to complete the minutes of agreement and consent order. However, by the end of November it appears that she had determined to seek to challenge the agreement, and in December 2012, she dispensed with Mr Martin’s services and returned to Mr Stokes.
The wife’s Form A was filed on 17th January 2013, with the husband’s application for notice to show cause why an order should not be made in terms of the agreement following, inevitably, 6 days later. That is the factual background to the dispute upon which these parties have now spent more than three quarters of a million pounds in bringing to trial.
The Law. When the wife first went to see Mr Martin, and the husband to Baroness Shackleton, in February 2011, the judgment of the Supreme Court in Radmacher (formerly Granatino) v Granatino [2010] UKSC 42, delivered on 20th October 2010, was just 4 months old, and therefore very much to the forefront of the minds of all specialist matrimonial lawyers. It remains the principal touchstone for all cases which involve the impact of a nuptial agreement upon the financial remedy process. In delivering the judgment of the Court, Lord Phillips dealt thus with the issues of weight that are relevant in this case:
“Factors detracting from the weight to be accorded to the agreement
68. If an ante-nuptial agreement, or indeed a post-nuptial agreement, is to carry full weight, both the husband and wife must enter into it of their own free will, without undue influence or pressure, and informed of its implications…
69. …Sound legal advice is obviously desirable, for this will ensure that a party understands the implications of the agreement, and full disclosure of any assets owned by the other party may be necessary to ensure this. But if it is clear that a party is fully aware of the implications of an ante-nuptial agreement and indifferent to detailed particulars of the other party’s assets, there is no need to accord the agreement reduced weight because he or she is unaware of those particulars. What is important is that each party should have all the information that is material to his or her decision, and that each party should intend that the agreement should govern the financial consequences of the marriage coming to an end.
70. It is, of course, important that each party should intend that the agreement should be effective. In the past it may not have been right to infer from the fact of the conclusion of the agreement that the parties intended it to take effect, for they may have been advised that such agreements were void under English law and likely to carry little or no weight. That will no longer be the case… In future it will be natural to infer that parties who enter into an ante-nuptial agreement to which English law is likely to be applied intend that effect should be given to it.
71. In relation to the circumstances attending the making of the nuptial agreement, this comment of Ormrod LJ in Edgar v Edgar at p 1417, although made about a separation agreement, is pertinent:
“It is not necessary in this connection to think in formal legal terms, such as misrepresentation or estoppel; all the circumstances as they affect each of two human beings must be considered in the complex relationship of marriage.”
The first question will be whether any of the standard vitiating factors: duress, fraud or misrepresentation, is present. Even if the agreement does not have contractual force, those factors will negate any effect the agreement might otherwise have. But unconscionable conduct such as undue pressure (falling short of duress) will also be likely to eliminate the weight to be attached to the agreement, and other unworthy conduct, such as exploitation of a dominant position to secure an unfair advantage, would reduce or eliminate it.
72. The court may take into account a party’s emotional state, and what pressures he or she was under to agree. But that again cannot be considered in isolation from what would have happened had he or she not been under those pressures. The circumstances of the parties at the time of the agreement will be relevant. Those will include such matters as their age and maturity, whether either or both had been married or been in long-term relationships before. For such couples their experience of previous relationships may explain the terms of the agreement, and may also show what they foresaw when they entered into the agreement. What may not be easily foreseeable for less mature couples may well be in contemplation of more mature couples…
73. If the terms of the agreement are unfair from the start, this will reduce its weight, although this question will be subsumed in practice in the question of whether the agreement operates unfairly having regard to the circumstances prevailing at the time of the breakdown of the marriage.
…Fairness
75. White v White and Miller v Miller establish that the overriding criterion to be applied in ancillary relief proceedings is that of fairness and identify the three strands of need, compensation and sharing that are relevant to the question of what is fair. If an ante-nuptial agreement deals with those matters in a way that the court might adopt absent such an agreement, there is no problem about giving effect to the agreement. The problem arises where the agreement makes provisions that conflict with what the court would otherwise consider to be the requirements of fairness. The fact of the agreement is capable of altering what is fair. It is an important factor to be weighed in the balance. We would advance the following proposition, to be applied in the case of both ante- and post-nuptial agreements, in preference to that suggested by the Board in MacLeod:
“The court should give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to their agreement.”
76. That leaves outstanding the difficult question of the circumstances in which it will not be fair to hold the parties to their agreement. This will necessarily depend upon the facts of the particular case, and it would not be desirable to lay down rules that would fetter the flexibility that the court requires to reach a fair result. There is, however, some guidance that we believe that it is safe to give directed to the situation where there are no tainting circumstances attending the conclusion of the agreement.
…Autonomy
78. The reason why the court should give weight to a nuptial agreement is that there should be respect for individual autonomy. The court should accord respect to the decision of a married couple as to the manner in which their financial affairs should be regulated. It would be paternalistic and patronising to override their agreement simply on the basis that the court knows best. This is particularly true where the parties’ agreement addresses existing circumstances and not merely the contingencies of an uncertain future.”
Although I have been provided with a fat bundle of authorities by the husband’s legal team, and a full 15 pages of legal argument in their estimable skeleton, there is not I think any great distance between the parties as to what the applicable law is in this case. All will therefore turn upon the facts which I find to be those to which I have to apply that law. Whilst I have been referred to a number of cases, there has been no argument about their impact. These have included RBS v Etridge (No 2) [2002] AC 773; NA v MA [2006] EWHC 2900 (Fam); N v F [2011] EWHC 586; V v V [2011] EWHC 3230; BN v MA [2013] EWHC 4250 (Fam); and Luckwell v Limata [2014] EWHC 502 (Fam).
Of the above, NA v MA [2006] EWHC 2900 (Fam) is the single one to which Mr Francis QC for the wife made reference which was not already included in the husband’s bundle. It is a decision of Baron J, from 2006, some 2 years before her later decision of NG v KR [2008] EWHC 1532 (Fam) came to be overturned by the higher Courts and provide the Supreme Court authority cited above. In that case, the judge set out the well-known tests applied since the famous Court of Appeal decision in Edgar:
12) …current Authority makes it clear that the agreements are not enforceable per se although they can be persuasive (or definitive) depending upon the precise circumstances that lead to their completion.
13) In Edgar v Edgar [1980] 1 WLR 1410, as Ormrod LJ, with whose judgment Oliver LJ agreed, said, at 1417C:
“To decide what weight should be given in order to reach a just result, to a prior agreement not to claim a lump sum, regard must be had to the conduct of both parties, leading up to the prior agreement, and to their subsequent conduct, in consequence of it. It is not necessary in this connection to think in formal legal terms, such as misrepresentation or estoppel, all the circumstances as they affect each of two human beings must be considered in the complex relationship of marriage. So, the circumstances surrounding the making of the agreement are relevant. Undue pressure by one side, exploitation of a dominant position to secure an unreasonable advantage, inadequate knowledge, possibly bad legal advice, an important change of circumstances, unforeseen or overlooked at the time of making the agreement, are all relevant to the question of justice between the parties. Important too is the general proposition that, formal agreements, properly and fairly arrived at with competent legal advice, should not be displaced unless there are good and substantial grounds for concluding that an injustice will be done by holding the parties to the terms of their agreement. There may well be other considerations which affect the justice of this case; the above list is not intended to be an exclusive catalogue.”
Oliver LJ similarly enunciated the general principle at 142E-F:
“… in a consideration of what is just to be done in the exercise of the court’s powers under the Act of 1973 in the light of the conduct of the parties, the court must, I think, start from the position that a solemn and freely negotiated bargain by which a party defines her own requirements ought to be adhered to unless some clear and compelling reason, such as, for instance, a drastic change of circumstances, is shown to the contrary.”
14) I accept that these are succinct and proper formulations of the test to be applied.”
Baron J went on, in what was another case where a wife was alleging that she had signed a PNA in circumstances of improper pressure, to assess the impact of the decision in RBS v Etridge (No.2) which Mr Todd QC for the husband in this case has cited. She said:
“16) It is the Wife’s case that she should not be held to this deal because she was improperly pressured into signing it as a result of her Husband’s conduct over a period of about 3 months. The formulation per Ormrod LJ is “undue pressure”. It is the Husband’s case that the test should be akin to that of undue influence in civil cases.
17) In RBS v Etridge (No 2) [2001] 2 FLR 1364 Lord Nicholls stated:
[6] The issues raised by these appeals make it necessary to go back to first principles. Undue influence is one of the grounds of relief developed by the courts of equity as a court of conscience. The objective is to ensure that the influence of one person over another is not abused. In everyday life people constantly seek to influence the decisions of others. They seek to persuade those with whom they are dealing to enter into transactions, whether great or small. The law has set limits to the means properly employable for this purpose. To this end the common law developed a principle of duress. Originally this was narrow in its scope, restricted to the more blatant forms of physical coercion, such as personal violence.
[7] Here, as elsewhere in the law, equity supplemented the common law. Equity extended the reach of the law to other unacceptable forms of persuasion. The law will investigate the manner in which the intention to enter into the transaction was secured: ‘how the intention was produced’, in the oft repeated words of Lord Eldon LC, from as long ago as 1807 (Huguenin v Baseley (1807) 14 Ves 273, 300). If the intention was produced by an unacceptable means, the law will not permit the transaction to stand. The means used is regarded as an exercise of improper or ‘undue’ influence, and hence unacceptable, whenever the consent thus procured ought not fairly to be treated as the expression of a person’s free will. It is impossible to be more precise or definitive. The circumstances in which one person acquires influence over another, and the manner in which influence may be exercised, vary too widely to permit of any more specific criterion. [emphasis added]
18) This is a fair formulation to enable the assessment of any given set of circumstances. However, in a case involving a Husband and Wife where it is clear that interdependence and mutual influence are the basis of the relationship, I consider that the Court has to take special care when assessing the manner in which each party’s conduct affected the other. For example, if a wife has been accustomed to placing reliance upon her husband’s decisions she might be much more easily influenced than an individual in a commercial transaction.
19) In Etridge Lord Nicholls stated at 1368:
“[8] Equity identified broadly two forms of unacceptable conduct. The first comprises overt acts of improper pressure or coercion such as unlawful threats. Today there is much overlap with the principle of duress as this principle has subsequently developed. The second form arises out of a relationship between two persons where one has acquired over another a measure of influence, or ascendancy, of which the ascendant person then takes unfair advantage….
[9] In cases of this latter nature the influence one person has over another provides scope for misuse without any specific overt acts of persuasion. The relationship between two individuals may be such that, without more, one of them is disposed to agree a course of action proposed by the other. Typically this occurs when one person places trust in another to look after his affairs and interests, and the latter betrays this trust by preferring his own interests. He abuses the influence he has acquired……
[10] The law has long recognised the need to prevent abuse of influence in these ‘relationship’ cases despite the absence of evidence of overt acts of persuasive conduct. The types of relationship, such as parent and child, in which this principle falls to be applied cannot be listed exhaustively. Relationships are infinitely various….
[11] Even this test is not comprehensive. The principle is not confined to cases of abuse of trust and confidence. It also includes, for instance, cases where a vulnerable person has been exploited. Indeed, there is no single touchstone for determining whether the principle is applicable. Several expressions have been used in an endeavour to encapsulate the essence: trust and confidence, reliance, dependence or vulnerability on the one hand and ascendancy, domination or control on the other. None of these descriptions is perfect. None is all embracing. Each has its proper place.
[12] It is not essential that the transaction should be disadvantageous to the pressurised or influenced person, either in financial terms or in any other way. However, in the nature of things, questions of undue influence will not usually arise, and the exercise of undue influence is unlikely to occur, where the transaction is innocuous. The issue is likely to arise only when, in some respect, the transaction was disadvantageous either from the outset or as matters turned out.
Burden of proof and presumptions
[13] Whether a transaction was brought about by the exercise of undue influence is a question of fact. Here, as elsewhere, the general principle is that he who asserts a wrong has been committed must prove it. The burden of proving an allegation of undue influence rests upon the person who claims to have been wronged. This is the general rule. The evidence required to discharge the burden of proof depends on the nature of the alleged undue influence, the personality of the parties, their relationship, the extent to which the transaction cannot readily be accounted for by the ordinary motives of ordinary persons in that relationship, and all the circumstances of the case.
[14] Proof that the complainant placed trust and confidence in the other party in relation to the management of the complainant’s financial affairs, coupled with a transaction which calls for explanation, will normally be sufficient, failing satisfactory evidence to the contrary, to discharge the burden of proof. On proof of these two matters the stage is set for the court to infer that, in the absence of a satisfactory explanation, the transaction can only have been procured by undue influence. In other words, proof of these two facts is prima facie evidence that the defendant abused the influence he acquired in the parties’ relationship. He preferred his own interests. He did not behave fairly to the other. So the evidential burden then shifts to him. It is for him to produce evidence to counter the inference which otherwise should be drawn.”
20) Clearly, this statement of law requires some modification for the special relationship between spouses that I have outlined. Nevertheless, I am clear that, to overturn the agreement, I have to be satisfied that this Wife’s will was overborne by her Husband exercising undue pressure or influence over her.
21) I am also clear that if I do not overturn the agreement per se, I still have to consider whether it is fair and should be approved so as to become a Court order.”
I have all of the above in mind in deciding this case. Plainly, this couple’s age, maturity and experience would count in favour of this agreement being upheld. So too would the fact that the wife had received detailed legal advice, expressed by her lawyers to be watertight. How then does she set about challenging the agreement? The wife’s case, as expounded by Mr Francis QC, is essentially as follows.
a. That the PNA has been vitiated by duress, or undue pressure, or the exploitation by the husband of a dominant position over the wife, after taking into account the wife’s emotional state and the pressures which it is said that she was feeling under at the time. He suggests that:
i. Although the wife had received prior legal advice, its impact should be lessened because she had not read it or sufficiently absorbed it prior to concluding the agreement, because of the pressure she alleges were placed on her by the husband.
ii. Evidence of the necessary pressure is found in the PNA itself, because, the wife says, it is a dishonest document, asserting that the parties are hoping for a reconciliation at a time when the marriage had already broken down irretrievably.
iii. The issuing of a petition by the husband on 23rd February 2011, prior to the progressing of negotiations around the PNA, demonstrates that the husband had already concluded that the marriage was at an end; his subsequent urging of a PNA was therefore a cynical ploy to secure a better divorce settlement.
iv. Negotiation without disclosing the fact that a petition had been filed was underhand behaviour on the part of the husband and his solicitors.
v. There is evidence in the emails and letters sent between the parties that the husband was acting in a bullying fashion toward the wife, supported by her oral evidence.
vi. Reliance should be place on the incident alleged by the wife to have taken place on 14th March 2011, when she says (in her statement and in her oral evidence) that the husband took hold of her clothes at the neck, and threatened her with his fist.
vii. The fact that the wife entered into the agreement contrary to advice from solicitors and counsel is of itself evidence that she did so under duress
viii. A contrast should be drawn between the wife’s waiving of privilege in relation to her solicitors’ files, and the husband’s failure to do so.
b. Even if not vitiated by duress, the PNA is ‘plainly unfair’ in that its implementation leaves the wife in a position of real need.
c. If the PNA is set aside, Mr Francis QC suggested in opening that the Court should then have regard to computation – essentially the calculation of the value of the matrimonial assets in the case – to assess what could then be said to be the value of the wife’s sharing entitlement.
I shall deal with this last point first, for the quantification and distribution of the wife’s matrimonial entitlement, which would in the normal course of events be the first exercise with which the court in determining a financial remedy claim would concern itself, was never going to be a practical possibility at this hearing. Not until the opening of the case, and after the conclusion of judicial reading, did Mr Francis QC seek both to articulate and to quantify his client’s case in this regard for the first time. He defended his position by reference to the passage in his client’s open offer letter dated 18th November 2014, in which it was said: ‘In the event that it is not accepted before the final hearing commences, our client will not be restrained by her proposal, in particular in seeking a greater and fairer share than 7.5%.’
In the parties’ agreed case summary dated 9th March 2015, the wife’s proposal was re-stated as her receiving a lump sum of £2 million, in addition to the provision already granted to her by the PNA, with some additional pension sharing. Whilst a question asked of the court in that document, if the PNA is not accorded full weight, is: ‘What is the fair award having regard to all the circumstances of the case?’; no answer is provided in the document on the wife’s behalf other than an award in terms of her open position, which is not calculated by reference to sharing. Further, in terms of computation, the only number offered in the document for the husband’s ‘un-investigated’ wealth was ‘not less than £37m’. No attempt has ever been made in the circumstances of this case to tease out the matrimonial assets from the non-matrimonial.
Consequently, had the court taken the view that the PNA was valueless and that this wife had a full sharing claim which ought to be investigated, the matter could not have been satisfactorily concluded at this hearing. As Holman J has recently restated in Luckwell v Limata [2014] EWHC 502 (Fam), it is the court, and not the parties, that decides the ultimate question of what provision is to be made; but an important element in that decision can be to consider how the parties have advanced their own case through what has already been very expensive litigation. In the event I am satisfied, as will appear from this judgment, that full justice to the wife’s claim can be done without further lengthy and expensive investigation into the detail of the husband’s finances, so the lacuna does not matter.
The Assets. Notwithstanding the difficulties in carrying out a precise calculation of the value of the matrimonial assets, a joint schedule has been prepared for this trial setting out what the parties have and how they hold it. The main computational issue relates to the value of the husband’s business interests, in relation to which the wife’s approach is to take a simple balance sheet valuation in relation to the various companies which he controls, by which she arrives at a total of £49.7 million for the value of his business assets. The husband’s own figure is somewhat discounted at £35.1 million, and this is the principal cause for the variance in the asset totals provided for each party: £54.3 million for the wife; £38.4 million for the husband. In fact, neither side have sought to attempt any reconciliation, and the disparity has no effect on outcome.
Of more importance are the figures for the assets which the wife has, following on from the implementation of the property transfers anticipated by the PNA, and consequent upon its terms being enforced, if they are, at the determination of this claim. She has in her possession 2 properties, both those passed in the 2011 negotiations, which are Lynwood – her present home, which is unencumbered with a net equity after costs of sale agreed at £533,500; and 7 Meadow Close, a smaller investment property which I shall take to have a value of £250,000 – the value ascribed for mortgage purposes recently, when the wife borrowed £151,045 against its security to fund in part her costs of these proceedings. This produces net after 3% costs of sale an equity value of £91,455. Disregarding the value of her car, her other agreed assets comprise just £307 in bank accounts, and £12,745 in her pension fund.
To this must be added the offered pension share from the husband, which is expressed to be 50% of the fund value as it stood in November 2012 – or £214,500. This means that without regard to her liabilities, and before considering the issue of the disputed loan to her son, the wife currently has cash/property of £625,262, and pensions, after the pension share, of £227,245. A total of £852,507.
The husband contends that added to this total should be the value of the loan made to the parties’ son Will in 2009, in the sum of £285,000. The wife’s case is that this was a gift and should be ignored. Further, amongst her liabilities she lists a loan from Will, in the sum of £86,000, which she proceeds to deduct from her assets. In addition she still owes her solicitors, after the above referred to mortgage over 7 Meadow Close, the sum of £85,738. She has other current debts of £2,461. Once the wife has taken these liabilities from her schedule, her case is that before pensions she has capital of just £428,312. I shall deal with my findings in relation to her assets below.
The Evidence. In order to determine the strength of the case which the wife puts, it has been necessary to assess carefully both the produced documents and the oral evidence which both parties have given to me during the course of the final hearing. Following that analysis a clear picture has emerged. I shall deal with the separate elements of the wife’s case in turn. Firstly, and despite receiving copious amounts of specialist matrimonial advice, the wife says that she failed to properly read or understand it, and consequently that its receipt is not an insurmountable hurdle to her in throwing of the burden of the agreement.
The wife’s task in relation to this first limb of her case is made much harder by the history which has emerged during the course of the proceedings. This has seen her visit a matrimonial specialist solicitor – the same Mr Stokes who now represents her in these proceedings – twice before the PNA came to be discussed in 2011. First she saw him in 2006, long before the parties’ marriage. She told me that that was just to discuss her position in the event of Mr Hopkins’ death – and not to do with any perceived difficulties in their then cohabiting relationship. This contention is not entirely supported by Mr Stokes’ attendance note of that meeting, at which she told him that: ‘We have been living together – it’s been hard work. I love him I’m not sure that he loves me…we have talked about splitting.’ Further, the letter of advice which Mr Stokes wrote to the wife subsequently in July 2010 stated that: ‘Notwithstanding your consultation with me in March 2006 and the advice I gave you, you separated from Mr Hopkins in November 2008′. So it is clear, as I find, that in 2006 the wife did seek advice from Mr Stokes about her position in the event of relationship breakdown, despite her denial.
Further, in 2010, when the wife saw Mr Stokes again just 15 months after the parties’ marriage, there can be little doubt of the purpose for which that meeting was arranged. In his 21 page letter of advice, Mr Stokes makes it very clear. ‘You have asked me to advise you with regard to matrimonial causes and, prospectively, to represent you in them’. The advice which he gives her in that letter (described as a ‘summary’ to follow their meeting, although he had also undertaken some further research into the husband’s asset position) is full and careful. It is based upon the premise that the husband’s resources encompass at least £46-7 million. The wife’s evidence is that she simply did not read the letter fully through at all until she went back to Mr Stokes, long after the PNA was signed, in December 2012.
She maintained this position, even though it is clear that she initially had it sent to the address of a friend, so that the husband should not know that she had obtained it. Notwithstanding that subterfuge, she told me that on receipt she merely skim read the first few pages and then gave up. This might just have taken her to the point on the fourth page of the letter where Mr Stokes wrote: ‘You have asked me advise you with regard to the financial provision, which will be made for you on divorce’. Her case is that she did not read on. She also told me that she did not read further when Mr Stokes resent the letter by email in November 2010, even though she referred at the time to her husband’s reaction ‘if he’d known what you’d actually sent me’. Finally, on 21st March 2011, she told the husband in an email that she ‘didn’t even read David’s letter until the last few weeks’. Yet her case now is that she failed to read the letter through at all for a further 21 months after that. I cannot accept this, given the content of these emails. I find that at the very latest by the time she went to see Mr Martin in late February 2011, and probably earlier, she had read Mr Stokes letter through, properly and to the end.
Further, in relation to her receipt of advice, she also said that she did not fully read or take on board the advice provided for her on Mr Martin’s instruction by Alexander Thorpe, on 5th July 2011, in which Counsel was so clear both in his disapproval of the terms of the proposed agreement, but also of the watertight nature of that agreement if, having received his advice, the wife signed. Again, the email evidence would suggest that the wife was at least aware of the tenor of the advice once she had received it. She says in terms in one of her 6th July emails that: ‘Counsel’s suggestions of huge rewards are of no interest to me’. The email itself betrays a significant understanding of the content of the advice. I will deal with her case that the husband dictated to her this and other emails below. For now I simply say that even if this were true, that does not mean that the wife had not read the document, and there is no doubt that she had every opportunity to do so before signing, if not by the date of that email then certainly over the 3 week holiday which she then took apart from the husband later in July 2011, before returning to sign on 1st August. She also then paid for this advice, which Mr Martin had, expressly, charged for in his bill. Given also that I have disbelieved the wife in relation to her evidence about her failure to read Mr Stokes’ letter, I have no hesitation in finding that she took the opportunity to read the advice from Mr Thorpe at some point before signing the PNA as well.
Finally, the disclaimer which the wife signed on 1st August 2011, after returning from her 3 week holiday away from the husband, is clear and unequivocal. She acknowledges that she has read the PNA carefully and believes that she fully understands it, and that she has been advised that it is not in her interests to sign it. Her oral evidence was that her whole goal at the time of signing the disclaimer and the PNA was to leave the husband. She said that if she hadn’t signed she would never have been able to get away. It is clear from the emails that she had been sending that she was keen to progress the negotiations, sign the deal and complete her separation. It is equally clear that the husband was less keen to bring the relationship to an end. He still hoped, even after August, that they could be reconciled.
Mr Francis QC for the wife suggests that the contents of the PNA were based by the husband upon information which he had gleaned from reading the 2010 letter of advice sent by Mr Stokes to the wife. I find that this allegation is not made out, as the suggestion for the transfer of Lynwood came from the wife herself, and is not referred to in Mr Stokes’ letter. Whilst the wife accepted that she never asked for more than the provision offered, she had also told the husband that she had seen Mr Stokes, and knew as I find at the latest during March 2011 that her husband had seen his letter of advice. I do not accept that the husband’s reading of that letter had a material effect, either on his position in the discussions, or on the wife’s.
By the time she signed the agreement, the wife well knew, as she had been advised, that if she waited for the court process she might get considerably more, and that having been so advised, any agreement to receive less would be ‘watertight’. I do consider that, having received that advice, the burden clearly shifts to the wife to demonstrate that notwithstanding the advice, her free will was nevertheless overborne by the husband. It is clear that for her, at the time of signing, immediate separation was more important. That was something which she wanted to achieve, and which the husband wished to avoid. I have to consider whether in those circumstances she signed because of any improper pressure from the husband, or simply because the wife wanted to bring the partnership at least in the short term to an end.
The next part of her case is that the PNA document is dishonest in purporting to record the parties’ intention to preserve their marriage at a time when both had accepted that it had irretrievably broken down. Here, she relies heavily on the fact that the husband himself had given instruction to PHB to file a divorce petition in London on 23rd February 2011. She asserts that this is evidence that all of the husband’s subsequent negotiations with her ostensibly to effect a reconciliation were disingenuous, in that he had already determined, in any event, that their marriage was at an end.
The husband’s case is as follows. He had been told by the wife of her visit to Mr Stokes in July 2010. When searching for the parties’ marriage certificate prior to his first visit to PHB, he accepts that he found, and read, the letter of advice that Mr Stokes had written to her following that meeting. He told the wife that this had happened. He did not tell PHB of this until much later, in 2014. The letter included express reference to the starting of proceedings in Bristol or Exeter, potentially before HHJ Wildblood QC, a judge with significant financial remedy experience. The husband knows that judge. He was concerned that the proceedings, if they were to follow, should not proceed in his local area where confidentiality might be threatened. He therefore instructed PHB to issue in London as a precautionary measure. The petition was not served for another month because he was still then hoping to effect a reconciliation.
I accept what the husband told me about this. It accords with an email which he sent to the wife on 21st March 2011 in which he said in terms, ‘I don’t want to have my personal life exposed locally’. Whilst the practice of issuing petitions asserting marital breakdown tactically, which are not then served whilst the parties continue to negotiate to preserve their marriage, is undesirable, it does undoubtedly happen. It is especially inappropriate where jurisdictional issues are thereby created. Thankfully that has not been the case here. It is however instructive that, when both sides briefly agreed that divorce was inevitable and that financial proceedings would follow on 22nd March 2011, PHB immediately served the petition on the wife. However inappropriate, I accept that the filing of the petition in London was a step taken to avoid a local dispute by the husband, rather than an indicator that he had already determined that the marriage was at an end.
I reach this conclusion especially in the light of the history of the parties’ relationship to this point, their correspondence, and the wife’s own account that the husband throughout was continuing to seek a reconciliation with her. For example, on 21st March 2011 she sent an email to Mr Martin in which she said this: ‘(Baroness Shackleton) advised him to start the divorce proceedings on their first meeting, before I met you I believe, but he asked her not to send the papers out because he was hoping for a reconciliation, and it would upset me!’ I take this to be entirely consistent with the husband’s case on this point. I also keep in mind that when in 2008 the parties had separated for a short period, the letter which the husband wrote prior to the wife’s return was in very similar terms to those which he sent in 2011 especially the second letter sent on 17th June, where he essentially attempted to take all of the undoubted problems in the relationship onto his own shoulders in an attempt to win the wife back. The trick had worked 3 years earlier, after she had actually left the home. That it was not to do so again, whilst they were still under the same roof, was not I accept a foregone conclusion in his mind at that point.
I thus conclude that during the negotiations and up to the point in July 2011 when the parties went on separate holidays prior to returning and signing the PNA at the beginning of August, there existed in the husband’s mind at least a genuine hope that the relationship could be saved. And whilst the wife had evinced a determination to exit the marriage throughout the period of the negotiation, starting with her initial expressions to Mr Martin on 26th February that ‘the marriage had broken down irretrievably and that there was no chance of saving it’ she nevertheless engaged in counselling until April, and agreed to the conclusion of a Post-Nuptial Agreement, which concessions at least must have been sufficient to give the husband a measure of hope that the marriage could be saved. The letter which she sent in June 2011 headed ‘How Things Could Change!!’ is only consistent with her giving the husband to believe, whether or not honestly, that there might still be some hope for the relationship. The PNA was not consequently ‘a dishonest document’ when signed in August 2011.
However, that is not the end of the story, for the wife now says that the reason why, despite asserting her belief that the marriage was over, she negotiated and then concluded the PNA, was because she was under duress, undue influence or improper pressure from the husband, which was sufficient to overbear her free will in entering into the agreement.
In support of her case, the wife cites the two letters to which I have referred, sent to her by the husband in November 2008 and June 2011, in which he does acknowledge that he has been guilty of ‘bullying’ towards her, and appears to accept sole responsibility for the difficulties in their relationship. As I have already indicated, I do not read those letters literally in that way. In relation to the second, I am satisfied that it must be read together with the earlier letter sent on that day, in which the husband provided a more balanced analysis of the issues between them and made suggestions for both to adapt their behaviour if the relationship was to survive. I consider that the fact that he felt the need to send the second letter itself is indicative of a relationship between the parties where he is at least at that time exhibiting little effective control in their relationship.
The wife places pivotal reliance upon the incident which she alleges to have taken place on 14th March 2011. She first referred to it in a telephone conversation with Mr Martin on 21st March, when she said that ‘when they were discussing the finances on the last occasion, he got her by the throat physically’. It is noticeable that she does not make the allegation until after receipt of the letter from Mr Martin on 18th March in which he states: ‘I fear that you may be being bullied by Mr Hopkins’. Prior to that, she speaks to him on the telephone on 15th March, and sends emails on 15th and 17th, in which she does not mention the incident. She does express herself to be at a low ebb, feeling the after-effects of flu, and embarrassed to be thought weak for agreeing to the terms which the husband is offering.
She replies first to Mr Martin’s letter by email earlier on 21st March, saying: ‘You are completely right in what you say, I am still being intimidated’. Although she uses the word ‘still’, there is no note or record on Mr Martin’s file to indicate that she has made the allegation before. She concludes the email by saying: ‘As Bill has been constantly asking me to stay and being very sorry for his behaviour, it is quite difficult to deal with.’ She does not refer to any assault. There then follows the telephone attendance note in which the allegation is made. Much later, in a statement dated 9th January 2014, she provided more detail. She accused the husband of having ‘badgered and harassed her’ about the PNA from the beginning of March 2011, and on 14th, when she asked him about the fairness of the provision which was proposed, she said: ‘He became uncontrollably angry, grabbing my clothing under my chin, tightening my clothing around my neck and with his other hand raising his fist above my neck’. She continues that as a result she felt ‘distressed, apprehensive and intimidated’.
It is the husband’s case that the incident alleged simply did not happen at all. I am satisfied that it did not happen in the dramatised fashion recounted by the wife in her 2014 statement, and repeated to me in her oral evidence. I am not satisfied that there was not some physical tension between the parties, at what must have been an extremely fraught time between them, but it is clear that whatever form it took, its effect on the wife was not such that she was rendered thereafter incapable of forming her own mind about the issues under discussion. I bear in mind too that she does not allege any other incidents of physical aggression from the husband at any point during their relationship, and that it is not something for which he ever felt the need to offer apology in his ‘mea culpa’ letters in 2008 or June 2011.
In fact, as I find, her mindset at the time is fairly depicted in her own emails sent to Mr Martin, and set out at paragraph 15 above. In particular:
a. On 15th March, Mr Martin ‘discussed the matter in full and Mrs Hopkins was pleased that we had spoken about this’.
b. On the same day, she sent an email in which she said that she had ‘thought long and hard, and really want to go with her original wishes, to agree to the settlement… signing the post-nuptial settlement this way will be almost instantly achievable, and this is very important to me. Although I would not want to go into battle with Bill, I also do have a vested interest in staying ‘friends’, for my son’s sake if nothing else…’
c. On 21st she said: ‘Part of me just wants to get (out) or should I say run away, and feels fairly content with what he is offering me. The other side is saddened by his offer, and being advised by yourself and loved ones not to agree… Bill puts such a plausible case of what his solicitor has advised, and saying if I’m expecting more, and he has to reveal his assets, he threatens court.’
I find in the light of these emails that the wife at this time was rational, thoughtful, saddened by her situation, but certainly well capable of independent thought. She knew her own mind, and was keenly aware of her own objectives. There is no evidence that at this time, just after the alleged incident upon which her case now places so much reliance, that her will was overborne and she was not capable of balancing the alternatives before her. In this context, I find that the fact that the wife chose to reject the professional advice that she was receiving was entirely explicable, and not reflective, of itself, of any improper pressure being applied to her by the husband.
Indeed, it is also significant that Mr Stokes’ long letter of advice sent in July 2010 makes no reference to any serious allegation made to him of bullying or intimidating behaviour. Mr Francis QC for the wife does point to the attendance note of the parties’ meeting, dated 7th July 2010, where he has written down: ‘Verbal “abuse”/”mean”‘. But that is just one a raft of complaints, which included disinterest in their son’s wedding, treating her as a housekeeper, never having her own choice & ‘petty stuff’. It is noteworthy that Mr Stokes’ translation of this into his letter of advice was to write: ‘On the basis of your instructions you are in a position to allege his unreasonable behaviour. I dare say that he will consider that he can allege yours.’ This, sadly, suggests a couple who were simply not getting on, without especial blame or imbalance on either side.
Next, it is the wife’s case that a number of important emails which she accepts she sent to her solicitor were in fact dictated to her by her husband. She accepts that she never told Mr Martin of this. These are said to be those sent on 15th April 2011, 1st July 2011, and then 2 sent on 6th July 2011.
a. The first of these (15th April) is simply an email in which she chides Mr Martin for what she sees as his slow response to PHB, and expresses anxiety that the financial application should be withdrawn from Court. Whilst these sentiments may have been shared by the husband at this time, they are both echoed in earlier emails that she accepts that she sent. On 21st March she tells the husband that ‘there is absolutely no reason to go to court, as I’ve said from the beginning’. On 7th April, she expresses herself to be ‘quite anxious’ to see the heads of agreement of the post nuptial settlement. In using the term Ancillary Relief Form A she was picking up a phrase from PHB’s letter of 6th April which she had seen. I am therefore unable to conclude, in the face of the husband’s denial, that this was a dictated letter.
b. On 1st July, the wife apologises for being short with Mr Martin, then complains and asks why he had not already raised queries on the draft PNA. She goes on to indicate her satisfaction with the settlement and indicate that she sought no amendments. She had sent emails with similar tone and content on 10th and 21st June. Her statement that ‘no likely award from a court case is of interest’ is also entirely consistent with what she has said earlier. Again, there is no reason here why her case that this email is not her own composition should be preferred. The fact that an incomplete draft was sent to Mr Martin is not probative either way, and again I cannot on balance find that this email was dictated to her.
c. The 2 sent on 6th July are as I find more difficult; especially the wife’s statement in the first email that: ‘We are still living together, having counselling, and trying to resolve our differences.’ Also, the reference to the parties going on holiday, without indicating that they would in fact be in separate places for different durations. The balance of the missive reveals that the author had certainly read Alexander Thorpe’s advice, in some detail. The wife indicates that she will have her computer with her on holiday, so will be able to respond to any necessary amendments while she is away. She finally states that ‘it is a disappointment to us both’ that the agreement is not yet finalised. I conclude that the husband probably did have some input into the drafting of this email, but that parts of it certainly came from the wife alone. There is no sufficient evidence to establish whole scale dictation, but perhaps cooperation in relation to the line that the parties should take with their advisers at this point.
d. The second email of 6th July, sent later that evening and querying Mr Martin’s proposed deletions from the draft PNA may have been drafted after discussion with the husband, but I do not find on balance that it must have been dictated by him. There is nothing in these emails as a whole which supports the wife’s case that she was suffering from improper pressure from the husband over this period, or that she was not expressing her own views or thoughts, even if on occasion shared with the husband, when she communicated with her solicitor.
I have considered whether the husband’s own confession to bullying behaviour in his letters without more can be sufficient to vitiate the wife’s signature on the PNA, or might support the wife’s case in relation to the other allegations which she makes. Given that there is no persuasive detail of the form which this bullying took, or was taking at the time when the agreement was discussed, I find such a suggestion difficult. The wife placed particular reliance on an email sent to her by the husband on 21st March 2011, which read: ‘Please can you let me know, if we are going to progress this, have you given your solicitor the instructions that we discussed last week?’ I did not read this to be overly sinister, as the wife has suggested. Indeed there is no credible evidence to support the wife’s assertion that during the relevant period she was being ‘controlled’ by the husband. And given the significant flaws I have identified in the rest of her evidence to me, I cannot rely upon her unsupported, and self-serving, assertion.
Moreover, in relation to any perceived physical or emotional threat, from the critical month of March 2011, 4 more months followed while financial disclosure was exchanged and detailed advice given, during which there are no further or more striking allegations made. In June 2011, the husband offered fulsome apology for his behaviour, motivated as I have found by a desire to rekindle the relationship. During July, the parties were apart on holiday, and had ample time to think things through. It is only after all of that that the wife returned to her solicitors’ office, and signed the document.
I must also have regard to Mr Martin’s clear and unqualified observations of the wife’s condition and frame of mind in early August when the agreement was signed and dated. He describes her as ‘entirely comfortable’, and ‘cool, calm and collected’, and concludes: ‘I have absolutely no doubt that for whatever reason she wanted to do what she was doing in the full understanding of the consequences thereof.’ Although the wife tells me now that however she may have appeared, she was not in fact in that state, I am driven from all of the above circumstances, and the fact that she has not chosen to call Mr Martin as a witness, to find that his observations of her at this time must carry weight. I accept what he says.
I draw further support for my findings from the fact that it was not until the end of November 2012, nearly 16 months later, that the wife finally determined that she would challenge the agreement, although she had not been living under the same roof as the husband since the signing. Indeed, had there not been an issue between the parties about the removal of certain plants for the garden of the former matrimonial home in the summer of 2012, she might have served the signed consent order then and accepted the full force of the agreement. It is difficult to reconcile that position with the wife’s case about the effects on her of her relationship with the husband in 2011.
I cannot, and do not, draw any inferences at all from the fact that the husband has not waived privilege in relation to his file with PHB in relation to the events at the time when the PNA was being discussed and signed. I have in any event been able to draw a clear picture from the materials available, and from the evidence that I have heard, of both parties and the relationship in which they were involved. Whilst the husband on occasion was predictably reticent on occasion to provide an answer which he thought might be prejudicial to his case, generally I found him to be an honest witness, and, save where I have said so expressly above, I preferred his evidence to that of the wife.
Finally I am also driven to find that the wife has deliberately sought to underplay the agreement which she entered into with the husband on 4th January 1989 in relation to the maintenance of their son William. That agreement, which she signed, essentially records that the husband made her a gift of £50,000 in transferring to her at an undervalue the property in which she and William were then living. That she later sough to suggest that a further unreferenced cash transaction took place through her then husband Mr Griffiths, in an uncertain amount, cannot be sustained and is not supported by any independent evidence. I accept the husband’s account in relation to this agreement.
Having made those findings, I now have to decide where they take me in determining the applications before me. I remind myself of the checklist provided by Counsel and endorsed by Holman J in Luckwell v Limata [2014] EWHC 502 (Fam) at [130]. It begins thus:
‘1. It is the court, and not the parties, that decides the ultimate question of what provision is to be made;
2. The over-arching criterion remains the search for ‘fairness’, in accordance with section 25 as explained by the House of Lords in Miller/McFarlane (i.e. needs, sharing and compensation). But an agreement is capable of altering what is fair, including in relation to ‘need’;
3. An agreement (assuming it is not ‘impugned’ for procedural unfairness, such as duress) should be given weight in that process, although that weight may be anything from slight to decisive in an appropriate case;
4. The weight to be given to an agreement may be enhanced or reduced by a variety of factors;
5. Effect should be given to an agreement that is entered into freely with full appreciation of the implications unless in the circumstances prevailing it would not be fair to hold the parties to that agreement. i.e. There is at least a burden on the (applicant) to show that the agreement should not prevail;
6. Whether it will ‘not be fair to hold the parties to the agreement’ will necessarily depend on the facts…’
It will be apparent from the above that I reject the wife’s case that she was operating under any undue influence, duress or improper pressure when the entered into the Post-Nuptial Settlement, which I do not find to be the dishonest document which Mr Francis QC characterises. There is simply no sufficient evidence to sustain a case to this effect. I must therefore give it due weight in the discretionary exercise under s.25 of the Matrimonial Causes Act which now follows. I find that it was entered into freely by the wife, and with full appreciation of its implications – she had received and understood copious volumes of legal advice from different sources going back years. There is also no sufficient evidence that the wife’s emotional state in early August was such that her participation in the signing can be undermined. The available evidence from Mr Martin is to the contrary.
However, there remains the over-arching search for fairness, and whilst the existence of the agreement certainly may alter significantly what may be seen as fair in the circumstances of this case, I have also to consider whether the agreement if now applied does leave the wife in a predicament of real need, in circumstances where there can be no argument but that the husband has more than a sufficiency. At paragraph [81] of Radmacher, the Supreme Court made this expressly clear:
‘Of the three strands identified in White v White and Miller v Miller, it is the first two, needs and compensation, which can most readily render it unfair to hold the parties to an ante-nuptial agreement. The parties are unlikely to have intended that their ante-nuptial agreement should result, in the event of the marriage breaking up, in one partner being left in a predicament of real need, while the other enjoys a sufficiency or more, and such a result is likely to render it unfair to hold the parties to their agreement…’
In Luckwell v Limata (above), Holman J expressed the relationship between the agreement and any needs argument thus:
‘[138] On the facts of this case there is only one consideration which is capable of outweighing the above considerations and capable of having the effect that the agreements should not be applied rigorously and to the letter. That consideration is current and likely future need. During the course of his oral argument Mr Marks submitted that “needs trump the agreement(s)”. I profoundly disagree with that submission. There is no question of needs being a “trump card”. They may, however, outweigh the fact of an agreement in the overall circumstances of a particular case.’
Real need in this context is not to be equated to ‘reasonable need’, as the decision in Radmacher made clear. As Mostyn J in N v F [2011] EWHC 586 confirmed at [18], in Radmacher ‘the husband’s needs were cut right down to a level that would have been inconceivable had there been no pre-nuptial agreement.’ Lord Phillips description of a circumstance where the court may have intervened was stark indeed:
‘[119]… Had the husband been incapacitated in the course of the marriage, so that he was incapable of earning his living, this might well have justified, in the interests of fairness, not holding him to the full rigours of the ante-nuptial agreement. But this was far from the case.’
In this case too it is relevant to bear in mind that the terms of the PNA as they evolved were largely based upon express requests from the wife. She sought the transfer of Lynwood to her, despite its ownership not by the husband but by one of his companies, and he agreed. There is an overage clause in favour of his company, which is something with which the wife does not wish for, and he is now prepared to remove. In addition she sought the investment property at 7 Meadow Close, then unencumbered, and the Audi car. It does not appear that she made any further specific requests. The further lump sum, which later became a pension share, was added at the husband’s suggestion, quite possibly to avoid any predicament of real need arising.
Mr Thorpe’s advice in 2011, based upon the wife receiving a lump sum of £350,000, and no pension share, but then using that sum to buy an annuity, was that she would derive an income of £25,664pa, to include rental income, and without the burden of the mortgage which she has since taken towards her costs bill. He had been told that the wife was not extravagant, and would struggle to set out a budget of £50,000pa. He took that figure as her income need, to produce a requirement for a fund of around £900,000. In fact, in her Form E dated 27th March 2013, she set out a current budget of £34,676pa. Whilst she also provided an ‘anticipated’ figure that rose to nearly £75,000pa, she made little attempt to defend it in her oral evidence. I consider that her real needs do encompass being able to live at the rate of £36,000pa., a rounded up Form E figure, once other liabilities are discharged. Given that it accords with her own expressed case, this cannot be seen as unduly restrictive.
The wife’s 2010 wish list as provided to Mr Stokes also included a housing fund of between £400,000 and £600,000. In Lynwood, she has that. In her Form E she sought a property fund of some £900,000. She suggested in her oral evidence that she might be contemplating a move to London. I am afraid that this in her was opportunistic. The basis of the agreement which she entered into can be taken to have been that she would have Lynwood to live in and just sufficient other assets to provide her with her necessary income needs. The wife will be 63 on 3rd April 2015. A Duxbury sum to provide £36,000pa for her, inflated at 3%, and with recourse to a state pension, would require a sum of £500,000. At present the terms of the PNA will leave the wife with £91,455 in Meadow Close and £227,245 in pensions. I disregard the value of her car and the small amount she has in a bank account. Together, these two sums total £318,700. She is thus £181,300 short.
It is then necessary to consider the other debts which she alleges, totalling £174,200, and the status of the provision which she made in 2009 for the parties’ son William. There can be little doubt that until June 2011, every reference to the provision made was reference to a loan, rather than to a gift. Mr Stokes’ 2010 attendance note does record that ‘He (the husband) said you had money and gave it away’, but it is also clear in recording instructions that the wife told him that she had made a ‘Loan to William c.£300k interest free to buy and do up house’. His subsequent letter of advice describes this loan as the wife’s ‘only significant asset’. It is simply not credible that he was mistaken in recording his instructions to this extent, and I find that the wife certainly described the payment as a loan at that time. Similarly, Mr Martin’s first attendance note in 2011 describes the wife as having ‘lent’ the funds. On 20th June 2011, he asks her to provide him with the date of the loan, and it is in reply to that email that for the first time a different account is given.
Strikingly, Mr Martin records the wife on 21st June as ‘reiterating’ the gift of the property to William, although this is the first time it has been so discussed. He also records for the first time that ‘the arrangement was that William would share his gift with Samantha and Henrietta’. By contrast, in 2010 the wife had told Mr Stokes, and he recorded in his letter, that: ‘William is expected to make arrangements soon, now that his house has been renovated, to repay about two thirds of the loan, with the balance being forgiven as part of a family arrangement, which you have made with Mr Hopkins’ concurrence.’ The husband denies knowledge of the arrangement, and it is clear that the wife’s account has shifted dramatically over time. The inevitable conclusion is that her current position is not an honest one, and that the money was indeed provided as a loan.
This is magnified by the fact that amongst her liabilities she asserts a debt to William, on account of funds borrowed to pay legal fees, in the sum of £86,000. She was constrained to acknowledge that, in the event that she was unsuccessful in her claim, he would not seek repayment of the funds. Given that I have rejected her evidence in relation to the loan, I must take that figure as no more than a part repayment of the sum that I find to be due. The other principal liability is to her solicitor, in the sum of £85,738, and is clearly due however.
I have determined in relation to the loan that the appropriate position to adopt is to accept the account given by the wife to Mr Stokes in 2010 as being what was in her mind at that time, and also as being a reasonable position for her to adopt in relation to the loaned money. I accept that the husband had not been told of this at the time, but I consider it appropriate to treat the outstanding sum due from William as being two thirds of the sum due, or £190,000. Of this, William has evidently repaid £86,000, which leaves a further £104,000 still owing. This is just more than enough to meet the wife’s additional unpaid legal bills and other smaller debts – £88,200. These can therefore be set off against each other, leaving the wife with a small surplus of £15,800.
The wife’s shortfall, apart from that surplus, and if she is not to be placed in a situation of real need, has been quantified over and above what the PNA provided for her in the sum of £181,300. In addition to indicating through Mr Todd QC that no costs order would be sought in the event that the PNA was upheld, the husband offers an additional payment to the wife in the sum of £200,000. It can be seen that this is almost exactly sufficient to meet the wife’s needs as I have quantified them, adopting the housing needs she herself has expressed at the time of the agreement, and allowing her to maintain her unvarnished Form E budget. The further surplus of £18,700 may leave the wife with total additional funds of £34,500, which she should retain.
I must finally ask myself whether such an outcome meets the overarching criterion of fairness in all the circumstances of this case. I acknowledge that this may be some distance from the order which the Court might have made had there been no agreement, or had the agreement been accorded no weight. The Court may then have had to involve itself in questions of valuation, active or passive growth, mingling and the quality of cohabitation – with uncertain outcome. These parties have been spared all that.
I have considered carefully whether it is appropriate that this agreement alters what would otherwise have been considered fair. I have found that this was an agreement freely entered into on both sides, and with full advice. It achieved what the wife was very keen to achieve at the point of its completion, that is an immediate escape from the husband, despite his desire for reconciliation. She understood at the time that it was a watertight agreement which would bind her, and she thereafter accepted it as binding upon her for a further 16 months. It is not an agreement which pays no regard to her needs.
I bear in mind as well that the wife’s case before me has been principally for a generous needs based assessment. This in itself must be a reflection of the fact that this agreement represents an acknowledgment by both parties that needs based quantification is fair to the wife. The difference between their two positions has essentially been whether those needs should be generously or more realistically assessed. That therefore is where the existence of the agreement has made a difference. That is fair.
I ask too whether it would be fair to the husband to disregard this agreement. In this regard I bear in mind particularly paragraphs 70, 72 and 78 of the Supreme Court’s decision in Radmacher cited above. In the absence of any compelling evidence that the wife did not enter into this agreement of her own free will, as she contends, and in the face of clear evidence that she had comprehensive advice about her entitlements otherwise, and the binding nature of the agreement; and further that she herself, notwithstanding that advice, has not seriously contended for more than a needs based award, which is what the agreement had given her; it is fair to hold her now to the terms of the PNA, and conversely unfair to the husband to make any different provision.
This result, which will consequently be that which I order, will mean that the net cost to the wife of these proceedings will have been £120,567 (her total costs less her lump sum award); to the husband the cost will have been £638,087 (his costs added to the lump sum). This imbalance reflects the fact that the wife’s needs have been engaged, but also serves to demonstrate that those needs would equally have been met by the original agreement arrived at in 2011, and that the need for additional payment has solely been created by the expense of these proceedings.
In his closing submissions, Mr Todd QC suggested that the appropriate order would be, in the event that I accepted his case, a dismissal of the wife’s claim on the basis that the husband would make the £200,000 payment. In the event, that payment has been required to meet the wife’s real needs, albeit created by the costs of litigation, so I do not take the view that the application should be dismissed by the order that I make. It will however be determined by payment of the sum which the husband has offered.
Keating -v- Keating & Anor
[2009] IEHC 405 (24 August 2009)
Judgment of Miss Justice Laffoy delivered on the 24th day of August, 2009.
The plaintiff, who was born on 1st August, 1937, is a bachelor. He has lived for most of his life on a small farm located in West Clare near Loop Head. In 1966 he became the owner of the farm which is registered on Folio 1454F, County Clare. He lived in a dwelling house on the land with his brother, a tradesman, who also helped on the farm, until his brother’s death in 1994. Thereafter, he lived there alone. The plaintiff’s parents had predeceased his brother, his father having died in 1973 and his mother having died in 1979. The plaintiff has one sister, but she has no connection with the events which have given rise to these proceedings.
The first named defendant is the widow, and the second named defendant is the son, of Patrick Keating (Mr. Keating Senior), who was a first cousin of the plaintiff. Mr. Keating Senior was approximately twelve years younger than the plaintiff. He died suddenly in January 1999 at the age of 48 from a massive heart attack. During his lifetime, Mr. Keating Senior had been the joint owner with the first named defendant of a farm of land adjoining the plaintiff’s farm. Mr. Keating Senior was a full-time employee of the Electricity Supply Board (the ESB) prior to his death. It was the first named defendant who was primarily concerned with their farming enterprise. For many years, the plaintiff and Mr. Keating Senior and the first named defendant enjoyed a friendly relationship and were frequent visitors to each others houses. As the second named defendant put it, his family lived only two fields away from the plaintiff. The second named defendant was born in January, 1977, so that he was just 22 years of age when the events which are the subject of these proceedings commenced. Having finished school, the second named defendant lived and worked in England and later in the United States. Following the unexpected death of his father in January 1999 he returned home. His dealings with the plaintiff in February 1999 were the genesis of these proceedings.
The plaintiff’s claim and the defendants’ response thereto as pleaded
The plaintiff’s claim as pleaded and as pursued is one of some complexity, notwithstanding the modest nature of the property the subject of the proceedings. It contains a number of elements.
First, arising out of a transfer dated 12th July, 1999 (the Land Transfer), whereby the plaintiff transferred the land registered on Folio 1454F of the Register of Freeholders, County Clare to the first named defendant for value, the plaintiff seeks an order setting aside the Land Transfer on the ground that it was procured by duress or undue influence or, alternatively, on the ground that it was an improvident transaction or an unconscionable bargain. The plaintiff claims ancillary relief with a view to having the title to the land restored to him. He also seeks an order directing the first named defendant to account for all the rents and profits received by her in respect of the land since the date of the Land Transfer. The land registered on Folio 1454F comprises three parcels: land at Feeard comprising 10.9560 hectares (approximately 27 acres); a plot in the townland of Ross comprising .4880 hectares (slightly over an acre); and one undivided thirteenth part of commonage in Feeard comprising 47.7300 hectares. In relation to his share of the commonage, the plaintiff had entered into an agreement for exchange dated 23rd February, 1987 with the Irish Land Commission for the exchange of his one undivided thirteenth share in the entire commonage for an area in the townland of Feeard comprising 4.173 hectares (slightly more than 10 acres), which the plaintiff beneficially owned in 1999. There was, and is, a modest single storey dwelling house on the land registered on Folio 1454F and there were certain farm buildings on the land. As regards this element of the case, the position of the defendants is that the Land Transfer was not procured by duress or undue influence. The defendants further contend that the Land Transfer was for full value and was not an improvident transaction or an unconscionable bargain.
The second element relates to what is described as a purported transfer of the plaintiff’s Suckler Cow Premium Quota (the quota) dated 28th May, 1999 (the Quota Transfer) and purportedly made between the plaintiff of the one part and the first defendant of the other part. The plaintiff contends that he did not enter into any agreement with the first named defendant for the sale of the quota to her and that the signature purporting to be his signature appearing on the Quota Transfer was forged. The plaintiff also seeks an order directing the first named defendant to account to the plaintiff in respect of all monies and profits received by her on foot of or by reason of the Quota Transfer from 28th May, 1999. The defendants deny that the plaintiff’s signature on the Quota Transfer was forged.
The third element is that the plaintiff seeks damages for detinue and conversion in relation to two separate species of property. First, the plaintiff contends that the defendants removed and converted to their use approximately 47 head of cattle, which were the property of the plaintiff and that the plaintiff received a total of approximately IR£3,500 from the defendants, being a sum significantly less than the combined value of the cattle. Secondly, it is alleged that the defendants removed and converted to their use two items of machinery the property of the plaintiff not included in the sale – a tractor mower and a hay turner. This claim was expanded to include a silage wagon and a trailer. It is alleged that the second named defendant dumped some of those items in a slurry pit. The defendants deny any wrongdoing in relation to either species of property. Their position in relation to the livestock is complicated, in that they contend that some of the cattle were included in their agreement to purchase land from the plaintiff, some of the cattle accompanied the Quota Transfer and, as regards animals which were the property of the plaintiff and were sold, they were sold for full market value and the defendants paid or proffered the full proceeds to the plaintiff.
The fourth element is a claim for damages, including aggravated or punitive damages or both, against the second named defendant for trespass to the person and assault by the second named defendant on the plaintiff. The incident which gives rise to this claim, which occurred after the plenary summons in these proceedings, which issued on 15th February, 2002, was served on the second named defendant on 16th February, 2002 is admitted.
The final element of the plaintiff’s claim is based on an allegation that the second named defendant severed the water supply to the plaintiff’s house and closed in the septic tank servicing the plaintiff’s house. The plaintiff claims injunctive relief in relation to such alleged interference.
In addition to traversing all of the allegations made by the plaintiff, the defendants have pleaded laches, delay, acquiescence and estoppel. On the basis of allegations of trespass on their land, that is to say, the land registered on Folio 1454F, against the plaintiff, they have counterclaimed for injunctive relief restraining trespass. Insofar as so much of those allegations as were not withdrawn were pursued, in my view, the allegations of trespass against the plaintiff were not established by the evidence.
The circumstances of the plaintiff in February, 1999
The plaintiff was 61½ years of age in February 1999. The significance of this is that he was eligible to participate in a scheme operated by the Department of Agriculture and Food known as the Scheme of Early Retirement from Farming (the ERS), which was put in place as a result of the 1992 CAP Reform. It was designed to encourage farmers between their 55th and 66th birthdays, who had been farming as their main occupation for 10 years, to retire from farming and to transfer their land to younger farmers who would thus expand their holdings. There was an upper age limit of 50 for transferees, who had to have a certain amount of farming experience or a relevant farming qualification in order to participate. A transferor received a monthly pension, which amounted to IR£7,275.31 (equivalent to €9,327.74) in 1999. The pension was payable for up to 10 years, but not beyond the transferor’s 70th birthday. The ERS required production or quota rights to be transferred with the land or otherwise disposed of. For participants who would become eligible for a State pension, for example, an old age non-contributory pension, provision was made for offset of the State pension against the pension payable under the ERS. The plaintiff was due to become eligible for a State pension as of 1st August, 2003, having attained the age of 66.
The evidence did not indicate what level of income the plaintiff had from his farming activities in February 1999, but I think it is reasonable to infer that it was fairly modest. What is clear is that the plaintiff had financial problems for at least two years and that he had been considering a number of options. This is clear from the evidence of Mr. Michael F. Nolan, a solicitor practising in Kilrush, who acted in the transaction at the heart of these proceedings, which culminated in the Land Transfer. The plaintiff consulted Mr. Nolan in September 1997. At that time the sale of the plaintiff’s house was mooted, but nothing happened. The following year, in February 1998 the plaintiff asked Mr. Nolan to act for him in connection with a mortgage transaction with The Wise Mortgage Company Limited (Wise). In fact, the plaintiff had entered into a commitment letter dated 3rd February, 1998 with Wise in relation to an advance of IE£25,000, to be secured by a charge on the land registered on Folio 1454F, County Clare. Mr. Nolan actively discouraged the plaintiff from proceeding with the transaction with Wise because of the high rate of interest which was being charged and the procurement and broker’s fees, which he regarded as being unfair. It also transpired that the land registered on Folio 1454F was already charged in favour of ACC Bank Plc. (ACC). It came to light that ACC held the land certificate in relation to the Folio when Mr. Nolan requested it from solicitors who had acted for the plaintiff, as one of a group of landowners, in a sale to the Commissioners of Irish Lights in connection with the Loran C mast at Loop Head. ACC had also registered a judgment mortgage on the Folio in October, 1997 on foot of a judgment obtained in March 1997 in the sum of IR£15,800.65. The position, therefore, was that the plaintiff could not give a charge to Wise. By April 1998 the plaintiff’s indebtedness to ACC had risen to IR£17,878.20.
I am satisfied on the evidence that Mr. Nolan gave prudent advice to the plaintiff in the period from February to April 1998. I am also satisfied that Mr. Nolan advised the plaintiff of what was, in his view, a way of dealing with the plaintiff’s problem, which was how he could raise the money to discharge his indebtedness to ACC. Mr. Nolan’s evidence was that he suggested to the plaintiff that he should consider availing of the ERS, which would allow him raise a lump sum by selling the land and reserving the right to stay in the house. This would also provide him with a valuable pension at a time when he was five years short of the old age pension qualifying age. While the plaintiff admitted that Mr. Nolan had suggested that he might avail of the ERS, his evidence was that he did not agree to it and that he was not interested in the ERS and he wanted to continue farming. I have no doubt that the plaintiff subsequently decided to apply to participate in the ERS.
At the time, around April 1998, the plaintiff held a quota of 37 premium rights. The following month, May 1998, he transferred two tranches of premium rights, aggregating 19.3 premium rights to two farmers in County Clare, leaving him with 17.7 premium rights. It is not clear from the evidence what consideration the plaintiff received for those transfers. However, what is clear is that he did not reduce his indebtedness to ACC. The plaintiff admitted that he was in serious financial difficulty at the time. However, his evidence was that he could have dealt with the problem by selling cattle or by applying for grants under the Rural Environmental Protection Scheme (REPS), for which he was waiting to qualify.
There is no doubt that the plaintiff’s health was compromised and he was in poor physical condition at the end of 1998 and the beginning of 1999. The plaintiff’s own evidence was that at the end of 1998 he got very sick, but he did not know what was wrong with him. He had blood on his coat. A cousin told him he had shingles. It was not until early February, 1999 that he decided to go to a doctor. He went to Dr. Thomas Martin Nolan, a brother of Mr. Nolan, who practised in Kilkee and Kilrush at the time. Dr. Nolan was called on behalf of the defendants. Dr. Nolan’s evidence was that he had no record of an attendance at his surgery by the plaintiff before February, 1999. He attended on a number of occasions in February, 1999 and he was treated for ulcerated shingles. Dr. Nolan’s evidence was that he recalled the plaintiff’s condition vividly. He had a very bad lesion on his right shoulder. Dr. Nolan described it as “shocking”. It had been there for some time. He also described the plaintiff’s back as “pretty awful”. Dr. Nolan treated the plaintiff with dressings and changes of dressings and he prescribed pain relieving medication.
The plaintiff’s evidence was that he was in a bad state of health in March and April 1999. He was run down and eating little. He was in severe pain with the shingles and that it continued up to the summer of 1999. By July he was still sick. The illness affected him in every way, including his nerves.
In January, 2005, six years after the outbreak of shingles, the plaintiff was referred by his solicitor for a medical report in connection with these proceedings to Mr. John A. Griffin, Consultant Psychiatrist at St. Patrick’s Hospital, Dublin. Dr. Griffin saw the plaintiff twice, on 27th January, 2005 and on 5th June, 2008. He described the plaintiff as “a rather circumstantial historian”, but nonetheless stated that he completely believed what the plaintiff told him during the course of both interviews. On the issue which I have yet to address, the plaintiff’s allegation that he was pressurised by the second named defendant to sell the farm, Dr. Griffin concluded that he was seriously pressurised. He also suggested that the vulnerability of his body and mind due to herpes zoster (shingles) would have played a part in worsening the pressure, which the plaintiff had described as being bullied, intimidated and threatened by the second named defendant and, on a number of occasions being beaten, punched and bruised. Dr. Griffin’s evidence was that post herpetic neuralgic pain can cause clinical depression. He expressed the view that a person suffering from depression should not make financial decisions.
Dr. Nolan who saw the plaintiff probably four or five times during February and March 1999 testified that there was no evidence of the plaintiff having been beaten when he physically examined him. Moreover, he has no record of the plaintiff having told him of any threat to beat him. He was looking to ascertain the underlying reason for the shingles. There was nothing in his examination of the plaintiff which suggested mental incapacity at the time. He made the point that the plaintiff was able to drive in and out to and from his surgery. He acknowledged that stress has a role in shingles.
There was other evidence of deterioration in the plaintiff’s physical condition around this time. Garda Charles Killeen, who had known the plaintiff since 1989, and who investigated the events of 16th February, 2002, testified that the plaintiff was in a bad state health wise around 1999. He was aware that the plaintiff had a bad dose of shingles and that his general condition disimproved. He saw a big change in the plaintiff, who had lost a lot of weight, and he also saw a change in the manner in which he kept himself, cleanliness being an issue.
The evidence also indicates that conditions around the plaintiff’s farm at this time were poor which, I think has to be attributed, at least in part, to the plaintiff’s ill health. There was evidence of overcrowding and underfeeding of cattle, of machinery being in a poor state and of the slurry overflowing.
Events between February 1999 and July 1999
There are three series of events during the period from February 1999 to July 1999 which have to be considered. The first is the series of events which led to the execution of the Land Transfer. The second relates to the submission of the Quota Transfer to the Department of Agriculture. The third relates to the disposal and movement of the plaintiff’s cattle. While the three are interconnected, I propose considering them separately initially.
However, it is necessary to make some general comments about the evidence. There was a complete conflict between the plaintiff, on the one hand, and the defendants, on the other hand, on most of the crucial events which gave rise to the proceedings. It is extremely regrettable that, when the parties came to testify as to the events in February and March 1999 in this Court, ten years had elapsed since the events had taken place. The parties were understandably vague on the detail of those events, although on certain matters a party testified as to what happened ten years ago with what can only be described as questionable certainty. Fortunately, Mr. Nolan’s conveyancing file, and, in particular, his contemporaneous attendances throw some light on what actually happened.
Events leading to the Land Transfer
There was a formal agreement for the sale of the land registered on Folio 1454F by the plaintiff to the first named defendant, the terms of which I will outline later. There is a serious conflict as to the circumstances in which that agreement came about.
The plaintiff’s evidence was that he came under pressure to sell the land from Mr. Keating Senior before his death and, after his death, he came under pressure from the second named defendant. The defendants’ position was that, as it was put to the plaintiff in cross-examination, he was “plaguing” Mr. Keating Senior and his family to buy his land, because the plaintiff wanted to sell his land but wanted it to remain in the Keating name.
In relation to the allegations of pressure by Mr. Keating Senior, the plaintiff’s evidence was that Mr. Keating Senior started to put pressure on him to sell the land following his brother’s death in 1994. Mr. Keating Senior put severe pressure on him a lot of times and the pressure was getting “more and more”. He was being bullied and assaulted by Mr. Keating Senior, who was twelve years younger than him and who was stronger than him. Specifically he alleged that Mr. Keating Senior assaulted him by putting him up against the wall in his home on more than six occasions at a time when, even though he was in severe pain, he was still working, which I understand to mean that the assaults occurred in December 1998 and January 1999. The plaintiff’s evidence was that he did not attend the funeral of Mr. Keating Senior because he was sick and he was disgusted with how he had been treated by Mr. Keating Senior.
The allegations of physical assault on the plaintiff by Mr. Keating Senior were first made during the plaintiff’s evidence in chief. The allegations were not pleaded in the case and the plaintiff made no complaint to the Gardaí or to Dr. Griffin that he was assaulted by Mr. Keating Senior. On the evidence I find that the plaintiff was not assaulted by Mr. Keating Senior, which will necessitate considering the submission made on behalf of the defendants that the plaintiff has not come to court with clean hands and should not be afforded any equitable remedy to which he might otherwise be entitled.
The plaintiff’s evidence was that, following his return from the United States at the time of his father’s death, the second named defendant started putting pressure on him to sell the land. He alleged that the second named defendant beat him in his own home on around twenty occasions. He alleged that he beat him with his fists on his back, on his face, on his eyebrows, everywhere. The second named defendant denied that he assaulted the plaintiff. His evidence was that the day after his father’s funeral, he was informed by a neighbour that the plaintiff wanted to see him. When he went to the plaintiff’s home he found him in a bad state. He took off the plaintiff’s shirt and bathed his back. He offered to take the plaintiff to the doctor the following day, but, when he arrived to do so, the plaintiff had already gone to see the doctor. Around this time, he visited the plaintiff most days. On each occasion the plaintiff would ask the second named defendant to buy the land.
In his evidence in chief the plaintiff said that he never agreed the terms which formed the basis of the formal agreement for sale of the land, although he acknowledged in cross-examination that there may have been discussion relating to the sale of the land. However, he was adamant that there was no discussion in relation to the transfer of any of his cattle.
The evidence of the second named defendant was that in the course of a conversation between the plaintiff and the second named defendant in a motor vehicle in February or March 1999, the plaintiff offered to sell, first, for IR£60,000, and later for IR£45,000, the land, the farmhouse and sheds and the quota and the cows that went with it. The plaintiff was going to sell the remainder of the stock. The response of the second named defendant to the offer was that he would have to talk to the first named defendant. He spoke to the first named defendant. She decided that she would buy. After a few days the plaintiff and the second named defendant met. The second named defendant told the plaintiff that his mother had agreed to buy and they shook hands on the deal. It was agreed that the plaintiff would continue to live in the house on the land until he passed away. The next step was to go to a solicitor. Mr. Nolan was chosen, although another firm was acting in the administration of the estate of Mr. Keating Senior. The evidence of the defendants was that Mr. Nolan was chosen to act at the behest of the plaintiff, one of the reasons being that the plaintiff did not want people to know he was selling the land. It was agreed that a deposit of IR£3,000 would be paid by the first named defendant.
In general, the evidence of the first named defendant was vague and unclear as to the terms on which the sale had been agreed. She gave the impression that the agreement had been made between the plaintiff and the second named defendant and that she simply went along with it. However, it was the first named defendant who was involved in instructing Mr. Nolan in relation to the purchase from the purchaser’s perspective.
The plaintiff attended at Mr. Nolan’s office on 8th March, 1999. Mr. Nolan noted in an attendance docket what he had been told by the plaintiff. It was that he was selling certain land, which approximated to all of the land registered on Folio 1454F to the first named defendant. The price was IR£40,000 plus IR£1,000 per year for five years commencing on 1st December, 1999 and thereafter on each 1st December. The first named defendant had paid the plaintiff IR£3,000 by way of deposit. Of the IR£40,000, IR£20,000 was to go to ACC. Mr. Nolan was told that the first named defendant was under fifty and that her name had been on the farm for more than five years. She had not spoken to the bank, obviously about getting finance for the purchase, yet. Mr. Nolan noted that the contract was to be subject to sanction for the ERS for the plaintiff and subject to the first named defendant getting finance.
All of that is very clear. However, the plaintiff’s evidence was that he did not know what the deal was. He did not discover it until a long time after. He knew he was signing about land but he had no idea what about. When it was put to him that his account was improbable, his response was that he could not tell Mr. Nolan anything, as he had not a clue and he was very sick. Moreover, it was the plaintiff’s evidence that he was brought to Mr. Nolan’s office by the second named defendant, who had beaten him up that morning, told him what to say and waited outside for him. He had received a cheque for IR£3,000 from the first named defendant. He cashed the cheque at the branch of AIB in Kilkee either before or after his attendance at Mr. Nolan’s office. He then gave the cash, under threat, to the second named defendant. Evidence was given by an employee of AIB that on 8th March, 1999 the plaintiff had negotiated a cheque drawn on the account of Catherine and Patrick Keating for IR£3,000, for which he obtained a bank draft of IR£1,000 at a charge of IR£1.50, paid an ESB bill in the sum of IR£55 and received the remainder in cash (IR£1,943.50). When he was recalled on the sixth day of the hearing, at the conclusion of the evidence, the plaintiff’s evidence was that he had actually cashed two cheques for the same amount on that date and that the above transactions must have been paid from the other cheque which had been lodged. On the basis of the documentary evidence furnished that is patently not the case. I accept the evidence of the second named defendant that he did not receive the proceeds of the cheque of IR£3,000.
Mr. Nolan’s evidence was that there was no indication that the plaintiff had been subject to a beating prior to his attendance at his office. It is quite extraordinary, however, that Mr. Nolan did not seek to take the cheque for IR£3,000, which he was aware had been furnished by the first named defendant as a deposit, from the plaintiff and hold it as stakeholder pending the completion of the transaction, in accordance with the normal practice in a conveyancing transaction.
The first named defendant attended at Mr. Nolan’s office on the following day, 9th March, 1999. Mr. Nolan’s attendance docket records that four matters were raised at that meeting. The first was that the first named defendant wanted Mr. Nolan to check her eligibility for a pension from the ESB. The second was that he was to check the acreage on the folios. The third was that he was to ensure that the first named defendant could be certified as an appropriate transferee under the ERS. The relevant form ERS1A was filled out and signed by the first named defendant and subsequently submitted to Teagasc. On 22nd March, 1999 the relevant certificate confirming the first named defendant’s status was furnished by Teagasc. The fourth matter was that IR£20,000 was to be paid as soon as possible.
Mr. Nolan attended to all of the matters which arose at the meeting with the first named defendant. He wrote to the first named defendant on 24th March, 1999 giving details of the land registered on Folio 1454F, omitting the plaintiff’s interest in the commonage, and stating that although the house was to be transferred to the first named defendant, the plaintiff would be retaining his right to live in it for his lifetime. The purchase price as set out in the attendance docket of 8th March, 1999 was set out, as was the fact that the plaintiff had already received a deposit of IR£3,000 from the first named defendant. It was recorded that the plaintiff had no milk quota and the same had been recorded on the form ERS1A, which also noted that no herd number was being transferred. The first named defendant was advised to get written confirmation of her loan sanction.
There was confusion up to 8th April, 1999 as to what acreage the plaintiff was transferring to the first named defendant. In a file note made on 8th April, 1999, Mr. Nolan recorded that the plaintiff had telephoned him to say that he had been discussing the matter with the first named defendant. The land being sold amounted to 35 acres because he had been allocated a share in the commonage. The plaintiff told Mr. Nolan that he had signed documents for the Land Commission in respect of the allocation. He promised to leave in Area Aid maps to Mr. Nolan which confirmed where that land was. Mr. Nolan noted that he duly did so. The note suggests to me that the plaintiff had a clear understanding of what he was selling to the first named defendant.
Mr. Nolan also recorded that the first named defendant, who had called to his office the previous day, had left him a bank draft for IR£17,000 pending the requirements of her lender, Bank of Ireland, being sorted out. The bank draft, which was dated 1st April, 1999, was drawn on Bank of Ireland and the first named defendant was the payee. The first named defendant’s evidence was that she gave the bank draft to Mr. Nolan in order to have the plaintiff’s deeds released from ACC. The bank draft was endorsed in favour of the plaintiff and was furnished by Mr. Nolan to ACC on 9th April, 1999 in full and final settlement of the monies owing by the plaintiff to ACC. This is another extraordinary feature of the transaction – that Mr. Nolan would permit the first named defendant’s money to be used to discharge the plaintiff’s secured indebtedness to ACC prior to the sale being completed. Mr. Nolan’s evidence was that he did not know who negotiated the settlement figure of IR£17,000 with ACC. When it was put to the plaintiff that he negotiated with ACC and negotiated the debt down from IR£20,000 to IR£17,000, he denied that and stated that no one had told him that the debt had been paid off. That evidence is simply not credible.
A formal contract in the form of the Law Society’s Standard Conditions of Sale bearing the date 8th April, 1999 was executed by the plaintiff and the first named defendant. On the evidence I believe that the first named defendant signed on 7th April, 1999 and that the plaintiff signed on 8th April, 1999. The contract reflected the terms which Mr. Nolan had previously recorded. It recorded that the deposit of IR£3,000 had been paid. The closing date was to be not later than one month from execution when the sum of IR£37,000 would be payable. The balance of IR£5,000 payable by instalments was to be secured by a charge executed by the first named defendant in favour of the plaintiff and any arrears were to carry interest at the rate of 15% per annum until payment. Special condition 6 erroneously stated that the purchaser, rather than the vendor, should be allowed to retain the use of the dwelling house on the land for his lifetime but would retire completely from farming. Special condition 7 stated that there was no milk quota attached to or appurtenant to the land in sale.
Following 8th April, 1999, Mr. Nolan attended to the title matters: the transfer of the plaintiff’s interests in the commonage which was dealt with in correspondence with the Department of Agriculture and Food; and the acceptance by ACC Bank of the sum of IR£17,000 in full and final settlement of the plaintiff’s indebtedness and the release of the land certificate in relation to Folio 1454F. On 16th April, 1999 Mr. Nolan gave Bank of Ireland an undertaking to lodge the land certificate in relation to Folio 1454F with the bank as security for the first named defendant’s indebtedness in due course and in the meantime to hold the title documents in trust for the bank.
On 26th April, 1999 Mr. Nolan wrote to the plaintiff informing him that the documents were ready for signing by himself and the first named defendant and suggested the following Friday, 30th April, 1999, for the closing of the sale. The letter explained that the first named defendant would hand over the balance of the purchase money in exchange for vacant possession of the land. Mr. Nolan spelt out that that meant that the plaintiff’s stock had to be cleared off the land. Mr. Nolan informed the plaintiff that he had the documentation ready in connection with the ERS, but it could only be lodged when the plaintiff had got rid of all his cattle, as he was required to show that he had retired from farming. He would also have to give up his herd number.
Closing did not take place on 30th April, 1999, although on the previous day the first named defendant had obtained a bank draft in her favour in the sum of IR£20,000 from Bank of Ireland. Both the plaintiff and the first named defendant attended at Mr. Nolan’s office on 30th April, 1999. What occurred is in dispute. Mr. Nolan’s evidence was that there was a short meeting, lasting about ten minutes. Mr. Nolan’s recollection was that there was an amicable discussion between the parties. The original contract signed on 8th April, 1999 could not be located. A blank counterpart was, however, available. Mr. Nolan’s evidence was that the parties signed the counterpart with the error in special condition 6 having been corrected. The counterpart was then dated 30th April, 1999. The plaintiff’s evidence was that he walked out of the meeting on 30th April, 1999 after refusing to sign any documentation. The plaintiff acknowledged that the signature on the contract which bears the date of 30th April, 1999, the original of which was put in evidence, is his signature, but he had not signed it on that day. Mr. Nolan’s evidence was that, if the plaintiff had walked out, he would have recorded that fact and that he would have ended his involvement in the matter, if there had been an issue between the parties.
On reviewing the situation, I think the probability is that Mr. Nolan’s recollection is incorrect and that all that happened on 30th April, 1999 was that Mr. Nolan inserted the date 30th April, 1999 on the undated counterpart, which had already been signed by the first named defendant on 7th April, 1999 and by the plaintiff on 8th April, 1999 and corrected the error in the special condition. I have come to this conclusion from comparing the manner in which Mr. Nolan witnessed the respective signatures of the plaintiff and the first named defendant on the copy of the contract dated 8th April, 1999 which is available and on the original of the contract dated 30th April, 1999. The plaintiff’s signature is witnessed by him as “M.F. Nolan”, whereas the first named defendant’s is written by him as “Michael Nolan”, which is consistent with the signatories not having signed at the same time. If I am correct on this, it is understandable that Mr. Nolan should have forgotten what actually happened ten years previously.
What is of more significance is that Mr. Nolan noted two matters on an attendance docket dated 30th April, 1999. The first was that the “quota of 20 animals are to be transferred to” the first named defendant. The second was that the land was to be vacated. It was noted that 16, obviously meaning cattle, would be put on to other land and that 20 had been sold to the second named defendant. Mr. Nolan could not recollect who gave him that information. He regarded the matter of the quota to be the parties’ business and he could not elaborate further on what he had written. Mr. Nolan’s evidence was that at the end of the meeting the parties left on good terms to work out when vacant possession would be available.
Mr. Nolan wrote three reminders to the plaintiff in relation to closing the sale and having vacant possession available for the first named defendant after 30th April, 1999. The first was dated 4th May, 1999. In that letter, Mr. Nolan stated that the first named defendant was anxious to close, because she was concerned that she would lose the quota and there would probably be problems for her as well with the Area Aid. The plaintiff was requested to attend on 19th May, 1999 to complete and to move his cattle off the land not later than 18th May, 1999. The second reminder was dated 10th June, 1999. Again, Mr. Nolan stated that the first named defendant was anxious to complete and referred to the fact that completion had been postponed to allow the plaintiff to dispose of his cattle. The plaintiff was also reminded that he was losing pension at the rate of IR£160 per week for every week that the closing of the sale was postponed, so that the delay was costing him a lot of money. The third reminder was dated the 2nd July, 1999. Again, this letter seems to have been prompted by the first named defendant. In it the plaintiff was reminded that he would have to put some arrangement in place about his cattle and he was reminded that he was losing his pension. At the end of that letter Mr. Nolan stated that it was a simple matter for the plaintiff to transfer the ownership of the cattle to the second named defendant so that he could get his pension.
The sale was closed on 12th July, 1999, when the plaintiff executed the Land Transfer of that date in favour of the first named defendant. The bank draft of 29th April, 1999 for IR£20,000 was negotiated on that day. A right of residence in favour of the plaintiff was not reserved in the transfer. It would appear that there was a separate deed of charge in relation to the outstanding balance of the purchase money, IR£5,000, which was payable by instalments. In due course on 18th November, 1999 the first named defendant was registered as full owner on Folio 1454F in succession to the plaintiff and a charge for IR£5,000 was registered as a burden in favour of the plaintiff. The judgment mortgage of ACC was subsequently discharged. While the plaintiff’s right of residence is not registered as a burden on the folio, the plaintiff’s entitlement to a right of residence for life in the house on the land is not, and never has been, disputed by the defendants.
The Quota Transfer
The quota was first mentioned to Mr. Nolan on 30th April, 1999. His evidence was that he suggested that the parties deal directly with the Department of Agriculture and Food. He had no recollection of seeing the transfer form, and, if it had been left into his office for forwarding to the Department, he would have expected that there would be a covering letter of some kind, which there was not. The evidence of the first named defendant was that she wrote to the Department for the transfer form and she filled out most of it and signed it and dated it. It was dated 28th May, 1999. There was an urgency about completing the form because the application had to be lodged not later than 31st May, 1999. This is clear from the form itself. The first named defendant testified that the plaintiff had also signed the form and that he had filled in the information in relation to the price and the number of units being sold. The first named defendant denied forging the plaintiff’s signature, as did the second named defendant. While the form suggested that there was an agreed price of IR£10,000 (IR£550 for each of the 18 units), it was common case that no money was ever paid for the quota.
The plaintiff testified that he never agreed to sell the quota to the first named defendant. The signature on the form was not his signature, nor had he authorised anyone to sign it on his behalf. He never saw the form until he received the transferor’s copy from the Department. However, he had done nothing about the matter when he received the copy, which must have occurred in June, 1999. The quota transfer form comprised three pages, the middle and bottom copies being self-carbonising. The middle and bottom copies were returned to the transferor and the transferee respectively with the receipt clause duly stamped. It is clear that the Department received the completed form on 31st May, 1999. The transferor’s copy with a receipt showing the date of 4th June, 1999 was returned to the plaintiff shortly after that date.
Mr. Sean Lynch, forensic document examiner, was called on behalf of the plaintiff. His evidence was that the signature of the plaintiff on the transfer form was a forgery and had been created from a tracing from the signature of the plaintiff on the contract dated 8th April, 1999, the original of which is not forthcoming. No evidence was adduced by the defendants to contradict the evidence of Mr. Lynch. I have come to the conclusion, not lightly, that the plaintiff’s name, purporting to be his signature, was inserted on the quota transfer form either by the first named defendant or the second named defendant. I have reached that conclusion on the balance of probabilities. I reject the submission made on behalf of the defendants, in respect of which no authority was advanced, that this aspect of the case requires to be proved beyond reasonable doubt. In this civil case the standard of proof is proof on the balance of probabilities in relation to all aspects of the plaintiff’s claim.
The disposal and removal of the plaintiff’s cattle
The plaintiff’s evidence was that in February, 1999 his herd was tested and at the time he had 60 animals, including 40 cows.
In March 1999 the second named defendant, with the assistance of a neighbour, rounded up 12 or 13 animals, perhaps including a calf, from the plaintiff’s yard and moved them to the defendants’ nearby land. The plaintiff arrived on the scene and became angry at what was taking place. His evidence was that he objected to the defendants taking the cattle. According to the second named defendant, it had been agreed between the parties that the sale would include 12 cattle and that the plaintiff would get rid of the remaining stock. The second named defendant admitted that he had selected the cattle to be taken without reference to the plaintiff and that the plaintiff had become furious. However, the second named defendant suggested that it was not the fact that the cattle were being taken away that annoyed the plaintiff, but rather the presence of a neighbour when this was taking place, because the plaintiff did not want his neighbours to know about the sale of the land. The second named defendant’s version of events was that this argument, like other arguments between the plaintiff and himself in 1999, was forgotten next day.
The position, accordingly, was that there were in the region of 47 animals on the land when the sale was closed on 12th July, 1999. In connection with his application under the ERS, the plaintiff was required to surrender his herd number to the Department of Agriculture and Food. He did so by a surrender document dated 16th August, 1999. Thereafter, the plaintiff’s stock had to be dealt with under the herd number of the first named defendant in relation to testing, disposal and suchlike.
The plaintiff and the ERS
Mr. Nolan assisted the plaintiff in connection with his application in relation to the ERS. The application form was signed by the plaintiff on the 16th August, 1999 and submitted to the Department on the 3rd September, 1999. The form disclosed that all of the land on Folio 1454F had been transferred to the first named defendant but the use of the house had been retained.
The plaintiff’s application was duly approved and the plaintiff was awarded a pension from 21st October, 1999 but not beyond 1st August, 2007. The plaintiff was notified of this by letter dated 23rd February, 2000 from the Department. The pension initially was at the rate of €9,237.74 (IR£7,275.31) “at 1999 prices”.
Disposal of the remainder of the plaintiff’s stock
In May 2000, the first named defendant involved Mr. Nolan once again in the matter of the disposal of the plaintiff’s stock, which is clearly indicative of tension between the parties. What the first named defendant told Mr. Nolan at that stage, as he recorded in an attendance note dated 8th May, 2000, was that she had bought 12 animals separately from the plaintiff for which she had paid by cheque and that another 18 were bought with the quota and were considered to be included in the purchase price for the land. The complaint of the first named defendant was that there were still 16 animals on the land, between cows and heifers and she wanted them either to be sold or removed immediately. All had been duly tested. Later, some of the animals were sold under the first named defendant’s herd number (although I note that all of the statements were directed to the second named defendant) at Clare Marts Limited in June 2000 and the cheque of the first named defendant in the sum of IR£2,302 was furnished via Mr. Nolan to the plaintiff, with a covering letter dated 19th June, 2000 from Mr. Nolan in which the deductions which had been made by the first named defendant (haulage and veterinary fees for testing) from the amount paid by Clare Marts Limited were explained. In that letter Mr. Nolan made it clear that the first named defendant wanted the remaining 9 cows on the land to be disposed of by the end of the year and arrangements would be made for their disposal.
In the following October, more animals were sold through Clare Marts Limited and the first named defendant’s cheque for the full amount (IR£925.22) paid was remitted to the plaintiff via Mr. Nolan.
On 4th December, 2001 Mr. Nolan sent to the plaintiff a further cheque from the first named defendant representing the proceeds of sale of 3 cows and calves through Clare Marts Limited on 8th October, 2001. The cheque was subsequently returned by the plaintiff uncashed. Mr. Nolan in his letter stated that 4 cows, the property of the plaintiff, remained on the land and he set out the tag numbers. He informed the plaintiff that the second named defendant intended bringing the cows to the Mart as soon as possible and would account to the plaintiff for the proceeds of sale. It is clear that the instructions for that letter were given to Mr. Nolan by the second named defendant. There is an attendance note dated 3rd December, 2001 on the plaintiff’s file in relation to the contention of the second named defendant that the first named defendant became entitled to 18 cows with the quota from the plaintiff. Mr. Nolan recorded that he knew nothing about 18 cows going with the land as part of the deal. He was informed by the second named defendant that he could “argue that point himself”. Mr. Nolan’s evidence was that 3rd December, 2001 was the first occasion on which he met the second named defendant.
IR£5,000 balance of the purchase money
With his letter of 4th December, 2001, Mr. Nolan sent to the plaintiff a cheque drawn on the account of the first named defendant in the sum of IR£2,000 representing two instalments of the balance then due. The plaintiff also returned that cheque. The first named defendant tendered two further cheques for the Euro equivalent of IR£1,000, which were dated respectively 14th November, 2002 and 26th November, 2004. In a reply dated 13th August, 2007 to a notice for further and better particulars from the plaintiff’s solicitors, it was stated that it was believed that a further payment of IR£1,000 had been made by the first named defendant to the plaintiff in respect of the sale monies. No evidence of that payment was adduced.
Other complaints
The evidence is replete with complaints by the plaintiff against the defendants and vice versa. The plaintiff complained that at some point in the middle of 1999 the second named defendant cut the water mains at the back of the plaintiff’s house while using a digger on the land, cutting off the water supply to the house and leaving him without drinking water and sanitary and heating facilities. At a later stage the second named defendant erected a fence near the plaintiff’s house which restricted his access to the well on the land, which has since become contaminated. The second named defendant admitted that he cut the water mains but he said that he did so accidentally and that he had repaired it. The fence was erected in order to prevent cattle from straying out on to the road.
The plaintiff’s complaint in relation to his machinery was that the second named defendant had taken some items and buried other items in a slurry pit on the land. The second named defendant’s response was that the machinery was scrap and of no use to the plaintiff. However, he acknowledged that the plaintiff was extremely annoyed at his course of action.
The second named defendant in turn, in December, 2001, raised with Mr. Nolan the issue of old machinery belonging to the plaintiff which remained on the land. Mr. Nolan advised him to contact the Environmental section of Clare County Council.
The position by December 2001 was that serious tension had built up between the plaintiff and the defendants. It was at that stage that the plaintiff instructed his current solicitor in relation to the matter. His evidence was that the trigger for his decision was that his cattle had been sold when they were worth nothing.
The evidence of the second named defendant was that by that stage he was getting sick of the situation in relation to the land because the plaintiff was refusing to sell his cattle and did not want his neighbours to know that he had sold the land to the first named defendant. He decided to return to the United States. He could no longer handle the arguments with the plaintiff, stating that “enough was enough”. The first named defendant’s evidence corroborated her son’s. She said he had been getting “hassle” from the plaintiff which he eventually was no longer able to handle and this led to his decision to sell stock and return to the United States.
The decision of the second named defendant to return to the United States brought matters to a head. These proceedings were issued on 15th February, 2002 without a preliminary letter having been dispatched to the defendants. The plenary summons was served on the second named defendant on the 16th February, 2002, because it became known that he was leaving the country.
Since February 2002 the first named defendant has farmed the land she acquired herself with the assistance of her neighbours. She has kept her herd number open in the hope that the second named defendant will return to Ireland.
The assault
The proceedings were served on the second named defendant by a summons server on the evening of Saturday, 16th February, 2002. He was socialising in a public house in the Kilbaha area after an international rugby match between Ireland and England. The summons server testified that he asked him to come outside and served him with the papers outside. The second named defendant then drove to the plaintiff’s house. In his statement to Garda Killeen on 19th February, 2002, he said he went to the plaintiff’s house to find out why the plaintiff alleged that he had not been paid for the land. When he arrived, the plaintiff withdrew into the house and locked the door, refusing to answer him. The second named defendant kicked the door in a fit of temper, picked up a battery and threw it through the glass of the plaintiff’s front door and then threw a spare wheel in through the plaintiff’s window. In his statement, he said that he knew what he did was wrong, he was sorry for breaking the glass and offered to pay for the damage done. The second named defendant was charged, appeared before the District Court and was given the benefit of the Probation Act.
Garda Killeen testified that the plaintiff was very upset about the incident. When he was investigating that incident, the plaintiff informed him that he had been threatened by the second named defendant. However, no complaints had been made to the Gardaí before that and Garda Killeen said that he never saw the plaintiff “roughed up”. The plaintiff’s evidence was that, as a result of the incident, he was so terrified that he had slept in one of the outhouses on the land for a few days. He also said that he has not gone out much since that time.
The second named defendant in his evidence expressed regret for the incident but he accepted that he had not apologised to the plaintiff at the time.
Value of the land as of 1999
No evidence of the market value of the land registered on Folio 1454F as of April 1999 was adduced on behalf of the defendants. However, Mr. Nolan expressed the opinion that the figure of IR£45,000 was a reasonable figure in the context of the deal in question. His view, from his knowledge of the area, was that it was not an undervalue but he did not rule out the possibility that a better price could have been got for the land. He emphasised that the number of potential transferees who fitted the profile of a qualifying transferee for the purposes of the ERS was limited. The fact that the plaintiff was remaining in the house for life was also a factor. His view was that the price was in accordance with the “going rate” or not that far from it.
Mr. Michael Fitzpatrick, a chartered surveyor and valuer, gave evidence on behalf of the plaintiff. He inspected the property on 4th February, 2002 and on 6th May, 2002 and gave his first report on 14th May, 2002. He estimated the open market value of the property as of 8th April, 1999 at IR£240,000 (€304,737). That figure had taken into consideration the plaintiff’s right of residence in the dwelling house for his lifetime. In his oral evidence Mr. Fitzpatrick stated that the market value would have been IR£40,000 higher if no right of residence had been reserved. The figure of IR£240,000 included what Mr. Fitzpatrick described as “Hope Value” of IR£100,000, the hope being that planning permission would be forthcoming for approximately 4 detached housing sites. Mr. Fitzpatrick described the property as having extensive road frontage and as being in a scenic location.
Mr. Victor Leyden, an architect, gave evidence on the prospects of obtaining planning permission in April 1999. Mr. Leyden inspected the land in June 2006 and he gave a report of July 2006. As he pointed out, because of the unusual configuration of the land registered on Folio 1454F, which is a long narrow holding traversed by three public roads, it comprises three separate parcels of land with five separate lengths with public road frontage. Mr. Leyden’s opinion at the time was that the land could accommodate four dwelling houses in addition to the existing dwelling house, which under the Clare County Development Plan 1999 could have been used as homes for local people or as holiday homes. Mr. Leyden’s oral evidence was that planning permission might have been obtained for four houses but, as I understood his evidence, it did not go beyond the realms of possibility.
Mr. Fitzpatrick’s initial valuation, leaving aside the land at Ross which is bog and which he did not value, and leaving aside the “Hope Value”, put almost IR£3,800 per acre on the plaintiff’s land as of April 1999. He did not cite even one comparison. In an updating report dated 25th February, 2009 he analysed statistical evidence published by the Central Statistics Office for the year 2000, there being no statistics available for 1999. Applying the figure for 2000, and again leaving aside the bog, he came up with a higher figure for the land, based on IR£4,500 per acre. Further, extrapolating from the Permanent TSB/ESRI House Price Index and applying the Revenue Commissioners “rule of thumb”, whereby site value represents approximately 25% of the total value of the dwelling house, he valued the four sites. His revised figure for the combined land value and “hope development value” was €340,911.
I consider the valuation evidence adduced on behalf of the plaintiff to be totally divorced from the reality which prevailed in 1999. I do not believe that any prospective purchaser would factor any development value into the price of the land. I also believe that the value put on it as agricultural land by Mr. Fitzpatrick is grossly exaggerated.
Having regard to the state of the evidence, it is impossible to reach a conclusion as to what the entire holding would have fetched if sold on the open market with vacant possession in April 1999. I think it is probable that it would have fetched more that IR£45,000. However, the deal encompassed in the agreement made by the plaintiff with the first named defendant in April 1999 ensured benefits for the plaintiff, which would not have been available on an open market sale – the reservation of a right of residence for life in the house and guaranteed eligibility for the ERS.
Duress/undue influence
As I have said at the outset, the plaintiff seeks to have the transfer set aside on the basis that it was procured by duress and undue influence. It is common case that it is only actual, not presumptive, undue influence which could arise on the facts of this case. As I have already stated, I find on the evidence that Mr. Keating Senior did not beat or bully the plaintiff in the manner alleged by the plaintiff in his evidence. I also find on the evidence that, prior to the plaintiff attending on Mr. Nolan on 8th March, 1999 and giving him instructions in connection with the sale to the first named defendant, the second named defendant did not beat, bully or intimidate the plaintiff to procure the sale of the land to the first named defendant, as the plaintiff alleged in his evidence. Moreover, as I have stated, I am satisfied that the plaintiff’s evidence that he was forced to hand over the proceeds of the deposit cheque of IR£3,000 to the second named defendant is untrue.
Taking an overview of the evidence, I think the true position is that it was the plaintiff who was trying to persuade Mr. Keating Senior during his lifetime, and after his death, the second named defendant to purchase the plaintiff’s land. I reach that conclusion because I believe that the evidence shows that the plaintiff’s motivation was to get a lump sum to discharge his indebtedness to ACC and to put himself in a position where he would be eligible for a pension under the ERS.
Accordingly, I consider that neither the contract for the sale of the land registered on Folio 1454F nor the Land Transfer, insofar as it gave effect to the contract, was procured by duress or undue influence, as alleged by the plaintiff.
Clean hands?
As is explained in Delany on Equity and the Law of Trusts in Ireland (4th Ed., 2007) (at p. 19), the equitable maxim that he who comes to equity must come with clean hands reflects the discretionary nature of equity and requires that a person seeking equitable relief must restrain from fraud, misrepresentation or any other form of dishonest or disreputable conduct if he wishes to be granted a remedy. An important aspect of the application of the maxim (cf. Delany at p. 21) is that a court will decline to intervene on the basis of the “unclean hands” principle unless there is a sufficient connection between the inequitable conduct and the subject matter of the dispute. The subject matter of the dispute with which I am now concerned is the Land Transfer. The plaintiff made an allegation of conduct on the part of Mr. Keating Senior, who is dead, and the second named defendant which, if true, would constitute serious wrongdoing. Because I do not accept the veracity of the plaintiff’s evidence on the allegations, I am satisfied that such wrongdoing has not been proven by the plaintiff and he has not established that the Land Transfer was procured by duress or undue influence. For whatever reason, in my view, the plaintiff has not given evidence which reflects the true position at the end of 1998 and the beginning of 1999. That means that one aspect of his claim fails. However, in my view, it does not mean that he cannot pursue an equitable remedy with a different foundation.
Therefore, I consider that it is appropriate to consider the alternative basis on which the plaintiff seeks to set aside the Land Transfer, namely, that it was of such an unconscionable and improvident nature that the court should intervene and set it aside in equity.
Unconscionable transaction
In making his case, counsel for the plaintiff relied on the following passage from Delany (op. cit.) (at p. 701):
“A transaction may be set aside in equity where one party is at serious disadvantage by reason of poverty, ignorance or some other factor such as old age, so that unfair advantage may be taken of that party. Equity will intervene particularly where a transfer of property is made for no consideration at all or at an undervalue and where the transferee acts without the benefit of independent legal advice.”
The circumstances in which the court will intervene to set aside an improvident transaction were considered by the Supreme Court most recently in Carroll v. Carroll [1999] 4 I.R. 241. There, in her judgment, Denham J. quoted the oft quoted passage from the judgment of Gavan-Duffy J. in Grealish v. Murphy [1946] I.R. 35 (at p. 49/50) to the following effect:
“The issue thus raised brings into play Lord Hatherley’s cardinal principle (from which the exceptions are rare) that Equity comes to the rescue whenever the parties to a contract have not met on equal terms, see Lord Hatherley’s judgment (dissenting on facts) in O’Rorke v. Bolingbroke; the corollary is that the Court must inquire whether a grantor, shown to be unequal to protecting himself, has had the protection which was his due by reason of his infirmity, and the infirmity may take various forms. The deed here was in law a transaction for value …; however tenuous the value may have proved to be in fact, and, of course, a Court must be very much slower to undo a transaction for value; but the fundamental principle to justify radical interference by the Court is the identical principle, whether value be shown or not, and the recorded examples run from gifts and voluntary settlements (including an abortive marriage settlement) to assignments for a money consideration. The principle has been applied to improvident grants, whether the particular disadvantage entailing the need for protection to the grantor were merely low station and surprise (though the grantor’s rights were fully explained) …, or youth and inexperience …, or age and weak intellect, short of total incapacity, with no fiduciary relation and no ‘arts of inducement’ to condemn the grantee …. Even the exuberant or ill-considered dispositions of feckless middle-aged women have had to yield to the same principle …”.
Counsel for the plaintiff submitted that, if the court were to find, as I have found, that it was the plaintiff who pursued the defendants to purchase the land, that is not a bar to the plaintiff being able to maintain an action to have the Land Transfer set aside as improvident. Counsel pointed to the fact that in Grealish v. Murphy, Gavan-Duffy J. found that the plan to put in place the transaction which was set aside in that case was not originated by the defendant, but by the plaintiff, Gavan-Duffy J. commenting that any picture of the defendant “as an adventurer, inveigling his witless victim into a trap in the October settlement, would be a caricature”. Those observations of Gavan-Duffy J. were made in the context of considering whether there was evidence of undue influence in relation to the transactions sought to be set aside.
Professor Delany in her commentary refers to a number of different formulations of the circumstances in which equity will intervene as being more specific or more comprehensive than the reference of Gavan-Duffy J. to the parties not having “met upon equal terms”. For instance, she quotes from the judgment of Peter Millett Q.C., as he then was, in Alec Lobb (Garages) Ltd. v. Total Oil (Great Britain) Ltd. [1983] 1 WLR 87 (at pp. 94/95) in which the essential pre-conditions for setting aside a transaction on the grounds of unconscionability are set out as follows:
“First, one party has been at a serious disadvantage to the other, whether through poverty, or ignorance, or lack of advice, or otherwise, so that circumstances existed of which unfair advantage could be taken. Second, this weakness of the one party has been exploited by the other in some morally culpable manner … And thirdly, the resulting transaction has not merely been hard or improvident, but overreaching and oppressive … In short, there must, in my judgment, be some impropriety, both in the conduct of the stronger party and in the terms of the transaction itself … which in the traditional phrase ‘shocks the conscience of the court’ and makes it against equity and good conscience of the stronger party to retain the benefit of a transaction he has unfairly obtained.”
That passage, in my view, provides helpful guidance for determining whether a transaction should be set aside in equity on the ground of unconscionability. I would observe that I have no doubt that, on the peculiar facts as recorded by Gavan-Duffy J. in Grealish v. Murphy, if the requirements set out in that passage had been applied, they would have been met.
Before considering whether each of those requirements has been fulfilled in this case, I propose summarising what I consider the evidence establishes in relation to the plaintiff’s approach to the transaction and his understanding of it.
The plaintiff’s actions through 1997 and 1998 clearly indicate that he felt under financial pressure. There was no evidence of what he earned in 1998 or 1999, but it is reasonable to infer that receipt of a pension under the ERS would be more beneficial to him than continuing to operate as a farmer and I believe that was his thinking at the time. In late 1998 and early 1999 he had two objectives. He wanted to raise a lump sum to discharge his indebtedness to ACC and he wanted to become entitled to a pension under the ERS. In the course of the hearing, alternative options to selling the land were suggested as being available to the plaintiff, for example, leasing the land for, say, ten years or continuing farming and selling stock to settle the ACC debt. In reality, neither option could have achieved both of the plaintiff’s objectives.
Counsel for the plaintiff put forward ignorance on the part of the plaintiff and his physical and mental health as support of the argument that he was under serious disadvantage.
On the issue of ignorance, in my view, the plaintiff had learned a lot from his dealings with Mr. Nolan in 1997 and 1998. I think he understood that selling the land, but reserving the house or a right of residence in the house, and obtaining a pension was the best way forward for him, even though he resiled from that position when testifying. He demonstrated in his dealings with Mr. Nolan on 8th March, 1999 that he understood the requirements of the ERS. He demonstrated later that he understood the acreage involved in the sale and the complexities of the exchange in relation to the commonage. I am satisfied that he was capable of sorting out his liability to ACC and negotiating a sum in full and final settlement and did so. What the plaintiff did not understand, or, alternatively, did not want to know, was that once the land was sold he could not keep his stock on the land and in the farm buildings for as long as he wished. In the course of his cross-examination, when the plaintiff’s obvious dissatisfaction with the deal after the contract was in place was put to him, the second named defendant stated that the plaintiff wanted to sell the farm and still farm at the same time. I think there is a large element of truth in that. However, the second named defendant also stated that the plaintiff wanted to go through with, that is to say, complete, the transaction. I do not think that it true. I think it is probable that the plaintiff did not realise that he would have to remove his stock from the land until he received Mr. Nolan’s letter of 26th April, 1999. The reason the sale of the land was not closed on 30th April, 1999 was because the plaintiff was not in a position to give vacant possession. The plaintiff’s delay in closing the sale suggests that he was reluctant to dispose of his stock with a view to closing. I think it probable that the plaintiff was pressurised by the defendants to close after 30th April, 1999 and his resistance to the pressure was weak because of his physical and psychological condition.
Apart from that, having regard to the defendants’ case as to the terms they agreed with the plaintiff, the Land Transfer cannot be considered on its own. There were parallel transactions in relation to the quota and the stock. As I have already found, the plaintiff’s signature was forged on the Quota Transfer. The quota had value, and the plaintiff should have received its value but he did not. As regards the stock, the defendants’ story evolved over time and is riddled with inconsistencies. However, I am taking their final position, as conveyed to Mr. Nolan in 2000 and 2001, as being that 18 animals passed with the quota and 12 animals were bought separately. I do not accept the evidence of the defendants that the overall transaction included agreement by the plaintiff for the transfer of the quota with 18 cattle. Apart from the finding that the plaintiff did not sign the Quota Transfer, the quota rights were notional rights which were transferable as such and stock would not normally accompany the transfer of quota rights. Moreover, even if there was a separate agreement between the plaintiff and the second named defendant for the sale of 12 cattle in early March 1999 and the defendants paid for those animals, which I doubt, there being no proof in the form of a cashed cheque adduced in evidence, even though such evidence was adduced in relation to other aspects of the parties’ dealings, the second named defendant rode roughshod over the plaintiff in selecting and removing animals without the consent of the plaintiff. In their dealings with the plaintiff in relation to the quota and the stock after March 1999, the defendants took unfair advantage of the plaintiff and I think it is probable that the second named defendant bullied and intimidated the plaintiff. Even though the dealings in relation to the quota and the stock were outside Mr. Nolan’s purview, in my view, they permeated the whole transaction, and, in any event, on the defendants’ case they were part of it.
I have come to the conclusion that the plaintiff was seriously disadvantaged because of his lack of understanding of the overall ramifications of what he was doing after he contracted to sell the land to the first named defendant and his state of health was a contributory factor in relation to his inability to understand, or, alternatively, to do anything to reverse the situation. The second named defendant, with the approbation of the first named defendant, exploited the situation once the plaintiff was contractually bound to sell the land. Unfortunately, in the words of Gavan-Duffy J. the plaintiff did not have “the protection which was his due by reason of his infirmity”. Mr. Nolan allowed the Land Transfer to come to fruition on an irregular basis, in that the plaintiff had actually received almost half the purchase price, and had disposed of most of it, when the contract was signed. After the contract was signed, Mr. Nolan’s focus was on the first named defendant getting title and vacant possession. In my view, given those circumstances, the plaintiff could not be said to have got independent legal advice. Aside from those circumstances, applying the principles set out by Barron J. in Carroll v. Carroll (at p. 265), the plaintiff could not be said to have got the benefit of independent legal advice.
In determining whether the transaction entered into by the plaintiff with the first named defendant was improvident, it is necessary, in my view, to have regard to the fact that the plaintiff’s objective was to qualify for a pension under the ERS and to continue to live in the house, with the implications those factors had in relation to the price he was likely to achieve. On the evidence before the Court, I cannot form a view as to what would have been a reasonable price having regard to those factors. However, when one puts the benefits which the first named defendant obtained in the overall transaction – the land, the house subject to the right of residence, the outbuildings, the quota and 18 head of cattle – alongside the price the plaintiff was to receive – IR£45,000 – with payment of one ninth of it deferred over a period from one to five years, in my view, the overall transaction was improvident. It was also oppressive and unfair.
Accordingly, I have come to the conclusion that the Land Transfer should be set aside unless it has been established by the defendants that on the basis of some equitable principle, the plaintiff has lost the right to have it set aside.
Affirmation and laches
For the reasons which have informed the conclusion that the plaintiff was disadvantaged in dealing with the defendants after he signed the contract for the sale of the land, I am of the view that, until he instructed his current solicitors around December 2001, the plaintiff was not cognisant of the facts which gave rise to his entitlement to have the transaction set aside, or, alternatively, he was, for the same reasons, incapable of taking the necessary steps to have the transaction set aside.
Accordingly, he cannot be said to have affirmed or acquiesced in the transaction, nor can he be said to be guilty of laches. Therefore, those defences fail.
Restitutio in integrum
The parties did not address the mechanics of the setting aside of the Land Transfer. In particular, they did not address the issue of whether restitutio in integrum is possible, as they should have done. The first named defendant paid IR£40,000 for the land. I am basing that conclusion on the assumption that, in the absence of concrete evidence to the contrary, the plaintiff was not paid one instalment of IR£1,000, and on the fact that he rejected the remaining four instalments which were proffered. On the setting aside of the Land Transfer, the first named defendant is entitled in equity to the return of the sum of €50,790 (IR£40,000). Subject to hearing further submissions from the parties on this point, what I would propose is that, on repayment of the sum of €50,790 to the first named defendant, either by way of set off against sums to which the plaintiff becomes entitled from the defendants or otherwise, the court make an order directing that:
(a) the plaintiff be registered as full owner on Folio 1454F in place of the first named defendant,
(b) the charge registered on the folio to secure the sum of IR£5,000 be discharged, and
(c) the land certificate in relation to the folio be delivered by the first named defendant to the plaintiff free from any equitable charge or lien, which will obviously necessitate the discharge of any monies owing by the first defendant on the security of the land.
Other remedies
Leaving aside the incident on 16th February, 2001, which I will deal with separately, the plaintiff has made an elaborate claim for damages under various headings which, in my view, is wholly unrealistic and exaggerated. It is also inconsistent with the claim to set aside the Land Transfer, insofar as counsel for the plaintiff were prepared to rely on the evidence adduced on behalf of the defendants that prior to the Land Transfer the plaintiff was not able to properly manage his farm and his domestic situation or even his person.
The major element of the plaintiff’s claim for damages is a claim for loss of profits and interest thereon from 1999 to 2009, the final amount of which came to almost €190,000. The foundation of this claim was the evidence of Mr. Pat McMahon, a member of the firm of Philip Farrelly & Partners, Agricultural Consultants. Mr. McMahon carried out an exercise in which he assessed, on a theoretical basis, the profits which the plaintiff would have earned from farming between 1999 and 2009 on the assumption that he would have been carrying on a suckler cow enterprise and a dry stock enterprise on the land. The exercise was wholly theoretical and it took no account of what the plaintiff actually earned in 1999 or 1998 from his actual farming enterprise. Mr. McMahon’s evidence was that he was told that accounts were not available. The theoretical exercise took no account of the plaintiff’s age or ability to farm. The pension which the plaintiff actually received in the period, which was payable only on the basis that he did not own the land, was not deducted. The taxation implications of Mr. McMahon’s theoretical assessment were considered by Mr. Niall Garvey of the firm of Niall C. Garvey & Co., Chartered Accountants. Mr. Garvey’s opinion was that, since income tax would be exigible on the missed profits and the interest thereon, the relevant sums should be paid in gross to the plaintiff. Mr. Brendan Lynch, Actuary, then performed the exacting task of calculating interest at the rate of 8% per annum on the missed profits after tax. For good measure, Mr. Garvey grossed up the interest to take account of the fact that the plaintiff would be liable for income tax on the interest.
I find absolutely no basis in fact for the proposition that the plaintiff missed any profits by reason of not being involved in farming from mid-1999 onwards. If there was a basis in fact for such a claim, it could have been substantiated by putting in evidence the facts that demonstrated that the plaintiff was making a profit before he applied for the pension under the ERS in mid-1999. The fact that no such evidence was adduced, which the plaintiff would have been capable of adducing if it existed, leads me to the conclusion that there is no such evidence, because there was no profit. Taking an overview of the evidence, I have come to the conclusion that, had he been farming, the plaintiff would not have made profits in excess of his pension under the ERS or from 1st August, 2003 in excess of the combined value of the pension under the ERS and the old age non-contributory pension thereafter, whether one factors in the interest for which he would have been liable to ACC or not, which the plaintiff’s expert witnesses also ignored. Accordingly, I do not consider it appropriate to award any damages for missed profits.
The plaintiff’s claim is even more bizarre when it comes to quantifying the claim for the items of machinery which it is alleged were appropriated by the second named defendant or ended up in the slurry pit. One of the items in question, a mower, was represented as having been purchased in 1993 for IR£1,800, although no evidence of this was adduced. Its value for the purposes of this claim was put at IR£800. Mr. Garvey in his report, which was put in evidence, went to the trouble of considering whether Capital Gains Tax would be exigible on an award in respect of, inter alia, this item. Overall, a value in excess of €10,000 is put on four items of machinery, which it is claimed that the second named defendant appropriated or destroyed, and over €7,000 in respect of interest is claimed on top of that. The second named defendant admitted that he disposed of a wagon and trailer, but he contended that they were scrap. I think it probable that they had very little value and I am going to award €2,000 damages under this heading.
Departing from the case as pleaded in the statement of claim, the plaintiff also seeks damages representing the value of 37 cattle on the basis that he received payment for 23 of the 60 cattle which were on the farm in February 1999. The contemporaneous evidence in relation to the disposal of cattle, based on the information given by the first named defendant or the second named defendant to Mr. Nolan as appears from his file, and the evidence given at the hearing, is contradictory and very confusing and, frankly, impossible to reconcile. I consider that the fair course is to compensate the plaintiff for the loss of 30 animals. Mr. McMahon has suggested figures based on the average prices for animals sold through Clare Marts Limited in the spring of 1999 as appropriate. The figures in question are considerably in excess of the prices achieved on the sales by the second named defendant of his own and of the plaintiff’s stock through Clare Marts Limited in 2000 and 2001, as evidenced by the statements put in evidence. Moreover, the evidence suggested that the plaintiff neglected his animals after the defendants took over the land and it was the second named defendant who had to feed and maintain the stock. In the circumstances, I propose to award €12,000 damages under this heading.
The plaintiff’s claim for restocking the land, which was particularised at €38,000 in June 2007, and evaluated by Mr. McMahon at between €40,000 and €45,000, is unsustainable. If the plaintiff were to restock the farm at the level represented by those figures, presumably, he would get value for his money.
In relation to the Quota Transfer, I consider that the plaintiff’s claim as pursued involves double accounting. He has claimed through Mr. Garvey’s calculations the Euro equivalent of IR£10,000, the price which appeared in the Quota Transfer but was never paid, together with interest on that sum which also has the benefit of the grossing up exercise. In addition, the plaintiff has claimed an account from the first named defendant of the profits she actually received from the Department of Agriculture and Food in respect of the premium rights which accrued to her following the submission of the Quota Transfer to the Department which amounted, in fact, to 15.7 premium rights, the Department having deducted two premium rights on the transfer. The profits were received by the first named defendant either under the Suckler Cow Scheme while it was still in force, or by leasing out quota, or under the Single Payment Scheme since it came into operation in 2005. Based on evidence given by an official of the Department of Agriculture and Food, I consider that the plaintiff’s calculation of the sums the first named defendant received at €39, 527.60, roughly speaking, correctly reflects the aggregate value of the benefits which accrued to her from her ownership of the quota. The first named defendant should account to the plaintiff for this sum. Therefore, as the plaintiff is, in effect, being recompensed for the loss of the quota, there can be no question of the plaintiff being recompensed for not being paid IR£10,000 for the Quota Transfer in 1999.
Finally, there was no evidence on the basis of which the court could assess the cost of restoring the water supply and sanitary facilities to the house. In any event, in relation to this element of his claim, the plaintiff failed to mitigate his loss. The injunctive relief sought is not appropriate, as the land will be reverting to the plaintiff.
Summary of remedies
In summary, therefore, the reliefs to which the plaintiff is entitled in relation to the Land Transfer, the Quota Transfer, the appropriation of his cattle and the loss of the machinery and equipment are that:
(1) the Land Transfer will be set aside on the basis that restitutio in integrum will be effected by set off to the extent appropriate,
(2) the first named defendant is liable to account to the plaintiff for the sum of €39,527.60 in respect of the quota,
(3) the plaintiff is awarded €14,000 damages for the loss of machinery and cattle.
Damages for assault/trespass
I have no doubt that the plaintiff had a very frightening experience on 16th February, 2001, which affected him adversely. However, I do not accept, as is asserted in the plaintiff’s claim, that he has suffered post-traumatic stress disorder in consequence of that event or his treatment generally by the defendants.
The plaintiff apparently did not receive any medical treatment following that incident. As I have stated, he was first seen by Dr. Griffin in January 2005. In fact, he was seen twice by Dr. Griffin, on both occasions, for medico legal purposes, not for treatment. The purpose of Dr. Griffin’s first report dated 28th January, 2005 was obviously to establish that the plaintiff was disadvantaged when he entered into the transactions with the defendants in the spring of 1999. In an addendum to his second report dated 6th June, 2008, Dr. Griffin stated that the plaintiff “probably fits into a diagnosis now of post-traumatic stress disorder”. More than seven years had elapsed since the events of February 2001, when this diagnosis was made. Therefore, it is not possible to find a causal link between the second named defendant’s maltreatment of the plaintiff and the condition Dr. Griffin diagnosed.
The appropriate level of damages for personal injuries is, in my view, €12,500.
With the leave of the court by order dated 16th October, 2006, the plaintiff delivered an amended statement of claim on 15th October, 2006. Apart from correcting an error in relation to the date of the Quota Transfer, the only change in the statement of claim was to seek aggravated or punitive damages or both from the second named defendant for trespass to the person or assault. While the conduct of the second named defendant on 16th February, 2001 was unquestionably reprehensible, and while, as I have recorded, he did not apologise to the plaintiff, he admitted what had happened both in the criminal proceedings brought against him and in these proceedings. I do not think that this is an appropriate case in which to award aggravated damages, particularly as I have found that the plaintiff in his testimony made allegations against the second named defendant which I have found to be untrue. I see no basis for exemplary or punitive damages on the facts of this case. In arriving at those conclusions, I have had regard to the principles laid down in Conway v. Irish National Teachers Organisation [1991] 2 I.R. 305.
General observations
The plaintiff is now ten years older than he was in 1999 when he considered that it was time to retire. He is now 72 years of age. Since he retired there have been changes at EU level and at national level in the monetary aids which are available to farmers. For instance, the Single Farm Payment was introduced in 2005. An important point made by Mr. McMahon in his report is that, even if the plaintiff returns to farming in the future, he will not have an entitlement to a single farm payment as he did not farm in the relevant years. Apart from that, the plaintiff’s changed circumstances as a result of this judgment may have implications in relation to his past and future entitlement to an old age non-contributory pension. This is something to which consideration will have to be given by the plaintiff and his advisors.
Finally, this action ran for six days in the High Court. While the court was not informed of the rateable valuation of the land, I would be very surprised if it exceeded the jurisdiction of the Circuit Court. All of the principal witnesses as to fact and most of the professional witnesses travelled from Clare or Limerick. I think the action would have been more appropriately brought in the Circuit Court in County Clare. I make that observation from the perspective of the real value of the claim and the cost and convenience to all concerned, not in response to the suggestion in the submissions made on behalf of the defendants that the plaintiff’s evidence might have been different if he had to give it in the Circuit Court in Kilrush. Notwithstanding that submission, the defendants took no steps to have the proceedings remitted to the Circuit Court.
Prendergast & Anor -v- Joyce & Ors
[2009] IEHC 199 (13 February 2009)
DEFENDANTS
JUDGMENT of Mr. Justice Gilligan delivered on the 13th day of February, 2009
1. These proceedings centre around a series of banking transactions which occurred on the 21st January, 1998, in the Bank of Ireland and Allied Irish Bank branches in Claremorris, County Mayo, when the late Monica Joyce, transferred into joint accounts with the defendant Dermot Joyce, the sums of IR£94,974.22, IR£17,853.63 and IR£63.01 to a total of IR£112,890.86 being €143,341.82. That sum has since increased to approximately €157,000 through the accrual of interest.
2. The persons involved are the late Jack and Monica Joyce, Evelyn Prendergast, who is Monica Joyce’s niece and the plaintiff in the proceedings [pursuant to order of this Court dated 29th July, 2008, made pursuant to O. 15, r. 37 of the Rules of the Superior Courts], and Dermot Joyce, the defendant herein who is a nephew of the late Jack Joyce. The second and third defendants have been permitted to withdraw from these proceedings on their undertaking to abide by the ruling of this court.
3. Jack Joyce (Jack) was born in 1919 and his wife Monica Joyce (Monica) in 1928. There was no issue of their marriage and in the 1950s Jack Joyce ran a small petrol station at Hollymount, which is located midway between Ballinrobe and Claremorris in the County of Mayo. The business was doing poorly and Jack and Monica emigrated to the United States of America where they remained until they returned to Ireland in 1973. Initially, they lived in a mobile home adjacent to the petrol station in Hollymount. In or about 1993, Jack and Monica constructed a house which was approximately eight miles from the garage premises, in Ballinastanford, Claremorris, County Mayo where previously they had had a second mobile home. It is clear that Jack and Monica Joyce were a very close couple and that Monica was effectively totally dependent on Jack.
4. The petrol business was not very successful earning approximately IR£500 gross per week. It appears that in the mid 1990s Monica became forgetful and when the new house had to be furnished in 1993, it was necessary for Mrs. Patsy Dalton, a family friend who met the couple daily on an ongoing basis, to undertake the work. She recalls, in evidence, that Monica did not always remember her name. She noticed from 1993 onwards that Monica’s situation got progressively worse. Around Christmas time 1997, there was an incident when Monica was alone in the mobile home at Hollymount adjacent to the garage and Mrs. Dalton found her in a completely exasperated and agitated state. She had two gas rings on without them being lit and when Mrs. Dalton arrived she could not remember who she was. Mrs. Dalton recalled that she was annoyed with Jack because she had a serious concern that the mobile could have gone on fire. She had a discussion with Jack and he intimated to Mrs. Dalton that Monica did not know what she was doing. Her overall view was that between 1993 and 1997, Monica had deteriorated rapidly.
5. Jack was taken into hospital in early January, 1998, and suffered a heart attack after his admission. It was initially anticipated that he should go on to make a recovery but unfortunately, he died on 14th January, 1998. Mrs. Dalton described Monica at her husband’s funeral as being in a state of complete shock. She appeared to be unaware that her husband had died and asked on a number of occasions as to where he was. At that time, Monica and Jack had moved to his niece Annie Walsh’s house and Mrs. Dalton was very concerned that something should be done about looking after Monica.
6. As regards Monica’s mental capacity, Mrs. Dalton, who had worked in the retail business all her life, stated that she would not at that time have let Monica look after the till in any of her shops. Monica was in her opinion “doolally” or out of her mind. From about the end of January, 1998, Monica was receiving 24 hour care from members of her family. By February she had commenced attending Ballindine Respite Home for people suffering from Alzheimer’s disease.
7. To the best of Mrs. Dalton’s knowledge, the only monies Monica had available to her were her social security pension which was approximately US$500 per month. Mrs. Dalton indicated that she never saw the defendant in the vicinity of Jack Joyce’s petrol station.
8. Evelyn Prendergast, the plaintiff in these proceedings, and the niece of Monica Joyce, gave evidence that she lived just outside Claremorris. Kevin Prendergast was her uncle. She visited Jack and Monica over the years on a very regular basis. By 1997/98 Monica had become very forgetful. She remembers calling over one Friday in 1994/95 and she found Monica generally in a bad way. She was panicking, and did not remember what day it was.
9. The plaintiff attended at both the removal for Jack and his funeral, and said that Monica Joyce did not appear to realise what was going on. By the end of January or early February, 1998 Monica was receiving 24 hour care from her surrounding family. She had initially been staying with Annie Walsh and then went back to her own house for a few days, and then went to live for the rest of her life with her sister, Marian Prendergast, until she died on 5th January, 2005. It was necessary for the entire family to rally around her. Evelyn Prendergast confirms that within a short time of Jack’s death Monica was attending at Ballindine Respite Home for people suffering from Alzheimer’s disease.
10. The plaintiff recalled that the only monies which Monica had access to was the sum of US$500 per month, which came to her by way of a United States social security pension. She never saw the defendant working in Jack’s garage. She was of the view that Monica was always anxious when left on her own, but when she was with Jack she was alright.
11. Seamus Hughes, an electrician by occupation, was a neighbour of Jack and Monica Joyce. From 1993 onwards, he was of the view that “Monica was not with it”. She used to go to the shop and forget the articles which she wished to purchase. Kevin Prendergast used to work the pumps at the petrol station for Jack and while he did see the defendant in the vicinity of the petrol pumps from time to time, he appeared to be there to carry out repairs to his car and the like. Mr. Hughes never saw him dealing with customers. When the defendant came down from Dublin he stayed at the Rectory and Mr. Hughes was the caretaker and had the keys to the Rectory and his view was that the defendant used to come down every couple of months. He never saw him as such, working the petrol pumps. Mr. Hughes often had tea and sandwiches with Jack and Monica in the mobile home and on these occasions Jack used to do all of the preparation.
12. Ms. Catherine Burke was a tax adviser to Jack Joyce and completed his VAT returns every two months. In essence, she says that she was friends with Monica and Jack and every time Jack came to her for the purpose of doing the VAT returns, Monica accompanied him. This would have been a continuing situation from 1989 onwards. However, in 1995/1996, Ms. Burke became aware that Monica used to stay out in the car, while Jack came in to her with the books. On occasions when Ms. Burke used to go out to the car, she became aware that Monica did not realise what was going on. She often did not call Ms. Burke by her name and Jack indicated to her that he could not leave Monica alone at home. She attended at Jack’s funeral and was of the view that Monica was in a daze.
13. The defendant gave evidence that he was a nephew of Jack Joyce’s on the Joyce side. He enjoyed a close relationship with his uncle, his father having arranged an apprenticeship for Jack as a mechanic and having assisted him financially in the construction of the garage. The defendant lives in Sandymount, Dublin and is a retired stock controller by occupation. He describes Jack’s business as being the sale of petrol, diesel, gas and agricultural diesel. He used to visit him very regularly and at weekends helped him with the pumps and he used to tidy up the showroom and he says that he also brought food for Jack and Monica. Since the early 1990s, he described how he could be down in Hollystown at the petrol pumps for twelve weekends during the summer. Some of the visits were simply to see how Jack and Monica were getting on and others were for the purpose of helping out with the petrol pumps. He says that he often took a week’s holiday to let them get away and that on one occasion in 1994, he was on holidays in Morocco and he came back early to assist them. He describes how Jack and Monica used to come to Dublin to visit him and would often stay for a week to ten days.
14. At a time in the mid 1990s, Jack and Monica had the idea of buying an apartment in Sandymount to be close to him and they came to Dublin and stayed for a week, but then changed their minds, indicating that they would not be interested in leaving home. The defendant described how Jack used to indicate to him that he was better than a son to them. He described how, in the mid 1990s, Monica was forgetful. In 1996, Jack had asked him for information in relation to Alzheimer’s disease and to post it on to him without any markings on the envelope. There was a reference to St. John of God’s in Stillorgan, Co. Dublin and that Jack was anxious to get Monica to a doctor, but subsequently the defendant understood that Jack had brought Monica to the doctor and that it had been indicated that everything was okay.
15. He says that he never expected any payment for the work he did and that he did it because he wanted to help his uncle Jack. Around 1996/1997, Jack advised him that he had two accounts in the Bank of Ireland and Allied Irish Bank (AIB) in Claremorris, which contained approximately IR£112,000, and that he wanted the defendant to have this money. He says that Jack told him that nobody knew about the accounts, other than the two bank managers and that his intention was that the money would be transferred into the defendant’s sole name.
16. The defendant indicates that in October, 1997 he was visiting again with Jack and Monica for a weekend and Jack told him again that he wanted him to have the monies in the joint accounts and that they must go to see Mr. Mellett in the Bank of Ireland in Claremorris, but this never actually happened.
17. The defendant spent New Year’s Eve of 1997 with Jack and Monica and then returned to Dublin on Thursday 1st January, 1998. On Wednesday 7th January, 1998, he got a call from Michael Flynn to say that Jack was in hospital. He checked the situation and was advised that Jack was alright and on Friday 9th January, 1998, as he was driving down to see Jack, he was advised that he had suffered a heart attack. Subsequently, however, Jack appeared to be alright and the defendant stayed with Monica in The Traveller’s Friend Hotel and visited Jack in hospital. On Friday 9th January, 1998, Jack asked him to stay behind at the hospital and said to him, “You have proved yourself”. The defendant recalls Jack telling him that Monica would not need the money, as he had insurance with the ‘Knights of Columbanus’. He says that Jack told him to go to the Bank of Ireland on Monday and see Séan Mellett and that he, Mr. Mellett, knew the arrangements and that Jack wanted the money put into the defendant’s sole name. He says that he indicated to Jack that he did not want the money in his sole name, but either with Jack and Monica or with Monica and himself.
18. The following Monday, he went to the Bank of Ireland in Claremorris and met with Seán Mellett, who was already aware of Jack’s wishes. He advised Mr. Mellett that he would prefer the account in the names of Monica and himself and Mr. Mellett agreed and indicated that he would telephone the defendant back the next day. A meeting was then arranged for the following Thursday 15th January, 1998. The defendant says that this had also been discussed the previous October with Monica, and Jack had said, in her presence, that these monies were to go to the defendant, and Monica was in agreement. He says that Jack had previously asked him to arrange his funeral and that he wanted to be buried with his mother and the previous October he had gone with Jack to the graveyard and checked out the grave where he was to be buried. Unfortunately, Jack died on Wednesday 14th January, 1998, and Mr. Mellett rang cancelling the meeting planned for the 15th. The meeting was rearranged for 21st January, 1998. The defendant attended the funeral, which he and Kevin Prendergast arranged. The removal was on 16th January and the funeral itself was on 17th January, 1998. He describes Monica as having been in a state of shock and at that stage she was staying with Annie Walsh. He says that Jack wanted Monica to be looked after by Annie Walsh. The only change he noticed in Monica at Jack’s funeral was that she was shocked.
19. On 19th January, 1998, the defendant went to see Dr. William O’Connor, a medical doctor practising in Hollymount, Claremorris, County Mayo, who was Jack and Monica’s General Practitioner. He says he went there to find out about getting a death certificate and as to how Monica was.
20. On Tuesday 20th January, 1998, following on Jack’s instructions, he went to see Catherine Clancy, the manager of AIB in Ballinrobe. He lodged approximately IR£11,500 of Jack’s money to a current account and he says that he was aware that Jack had previously told Ms. Clancy that he wanted the defendant to have everything. Subsequently, on 21st January, 1998, he brought Monica into the Bank of Ireland in Claremorris, and there were interviews with Joe Daly of Bank of Ireland Lifetimes from Eyre Square, Galway. He says that Monica was in agreement that the money in the joint account be transferred into another joint account with him and invested in a Lifetimes Bank of Ireland product. The paperwork was filled out and completed and the meeting lasted approximately an hour.
21. He then took Monica for lunch and then went to the AIB in Claremorris where they met with a Mr. Glynn, and the monies in the joint accounts as held by Jack and Monica in AIB Claremorris, were transferred into a new joint account in the names of Monica and the defendant. As in the case of the Bank of Ireland transaction, the account could not be accessed by one signatory alone; the signatures of both were required to withdraw funds. The defendant says that Catherine Clancy asked that Mr. Glynn of the AIB in Claremorris would give her a ring when he and Monica went in to the Bank to complete the transfer and this was done. The transaction lasted approximately half an hour and then the defendant brought Monica to see the solicitors Maguire and Brennan in Claremorris about Jack’s will and then he brought Monica back out to Annie Walsh’s. His view was that while Monica was forgetful, she understood what she was doing, both in the Bank of Ireland and in AIB. Monica was only following Jack’s instructions and, in particular, Jack had indicated that he did not want the monies in these accounts to go to the Prendergast side of the family. He says that Monica went into both banks freely with him and was only doing what Jack had said to her the previous October.
22. The defendant did not see much of Monica after the monies were transferred into their joint names. He was of the view that Jack wanted him to have everything regardless of Monica and accepted that Jack could have done this by way of a will. He was of the view that Jack had made an alternative will, but this had never been located.
23. He accepts that Jack cared very deeply for Monica and was concerned for her. He also accepts that Monica, after Jack’s death, never had the use of any of the money in the three joint bank accounts and derived no benefit therefrom. He accepts that the transfers of money on 21st January, 1998, were hugely important transactions for Monica. He was not able to offer any explanation as to why he had not explained to Dr. O’Connor what he was about, when he went in to see him on 19th January, 1998. He was unable to offer any clear explanation as to why the AIB joint accounts were not revealed until February, 2001 other than that he was following his uncle Jack’s instructions, Jack having expressed a wish that the accounts should remain a secret.
24. The defendant states that he would not have brought Monica into the two banks if he had thought she was vulnerable. His view was that she was in a fit condition and was fine on the day. He was of the view that a person could not be described as elderly at seventy years of age. His own view was that somebody would be elderly when they were 80 to 85 years of age.
25. Ms. Clancy, the manager with AIB in Ballinrobe, told the court that the late Jack Joyce had two accounts with her: a business account and a deposit account. The business account was constantly under pressure. She did not have any significant dealings with Monica, but she did meet the defendant on two occasions, approximately four years before Jack died, in Jack’s company in AIB bank in Ballinrobe. She recalled that Jack indicated that he wanted the defendant to have everything when he passed away. Ms. Clancy accepted that it happens that people indicate in her presence that they want someone else to inherit their estate, but that is not always the way it works out.
26. Seán Mellett told the court that he was the manager of the Bank of Ireland in Claremorris for six years from 1994 to 2000. He recalled Jack vividly and described him as an entertaining man. He used to talk a lot and Mr. Mellett recalled that any dealings with him always took a lot of time. He met Monica with Jack, possibly two or three times. Between the years 1996 and 1998, he was clear in his recollection that Jack wanted the money in the joint account to go to the defendant. The account was in joint names and either could withdraw the cash at any time. Jack had intimated to him that the defendant would look after Monica and that he wanted him to be the beneficial owner of the money. He did not want members of the Prendergast family to benefit from the money and was of the view that the defendant would look after Monica after he passed on. Mr. Mellett was aware that Jack and Monica were a very loving couple and that Monica agreed with whatever Jack said. On occasion when he met with Monica, he found her to be forgetful and accepted that she appeared to have memory problems.
27. When the defendant came to see him on 12th January, 1998, he indicated that he was not totally satisfied about having the money in his own name. The joint account was effectively dormant and Mr. Mellett accepts that he probably did not have any written instructions. Following his consultation with the defendant, he had been in touch with Joseph Daly from Bank of Ireland Lifetimes in Galway and a meeting was set up for the following Thursday 15th January, 1998, to discuss the product. Mr. Mellett confirmed that he had never previously met the defendant, and the first time he met him was when he came in to see him on 12th January, 1998. He understood that he had Jack’s verbal instructions to discuss the account with him.
28. He accepts that he did not know Monica at all and from the banking perspective he would accept that she could fairly be described as being elderly and he also accepted that, four days after having buried her husband, she was vulnerable. Mr. Mellett accepted that the transaction was completely improvident from the point of view of Monica, that there was a very substantial sum of money involved and that looking back on the situation it “looks bad”.
29. Dr. William O’Connor was the first witness to give evidence and he did so on the plaintiff’s behalf. In or about 1995, he describes Monica from the medical aspect as being very frail, depressed, severely anxious, suffering from poor concentration and memory, a person who was dependent on her husband for support. As early as March, 1995 he expressed the view in his medical notes that Monica might be senile. She was taking Prozac for depression, had attended a psychiatrist, and was taking Valium and sleeping pills. This situation generally continued between 1995 and 1998, with no improvement. In his opinion, she was a person who was not well physically or mentally, and following the death of her husband she made an unbelievable decline. In his view it is doubtful that she was capable of understanding the impugned transactions on 21st January, 1998, though he did not examine her on that date.
30. Dr. O’Connor remembered the defendant coming to see him on 19th January 1998, and he was of the view that he had come to discuss Monica’s affairs, and there was a discussion about the necessity for ongoing care for Monica. His recollection of that meeting is that he felt uncomfortable about it. He had a discussion on 5th February, 1998, with Kevin Prendergast, and he advised Kevin that medically, Monica was not fit to live alone or make any decisions about her future. Subsequently, he got a call to visit Monica who was, at this stage, staying with Kevin, and he found her disturbed and anxious, agitated and generally unwell, and he was satisfied that she had had an anxiety attack. Around the time of the funeral and as of 5th February, 1998, Monica would not have had the capacity to transact business. On 17th February, 1998, Dr. O’Connor, following an examination, declared Monica unfit to understand a legal document or execute a will.
Wills
31. Both Jack and Monica made wills. Jack’s will was made on 15th August, 1977, and he left everything he would die possessed of, or entitled to, to Monica, absolutely. Should Monica pre-decease him, and in that event only, he left his property at Ballinastanford to Monica’s nephew, Gerard Prendergast, and left his property at Hollymount to his nephew, the defendant. The balance of the estate was to be divided equally as tenants in common between eight parties, being his nephews and nieces on both the Joyce and Prendergast sides of the family, not including the defendant. In respect of this latter devise, it was specifically set out that this was only to take effect if Monica pre-deceased him. He appointed Monica and her brother, Kevin Prendergast, as joint executors.
32. Monica made her last will on 10th July, 1979, and she left everything she would die possessed of, or entitled to, to Jack, absolutely. In the event of Jack pre-deceasing her, and in this event only, she left her entire estate to be divided between the same eight nephews and nieces, not including the defendant, as set out in Jack’s will and she appointed her husband, Jack, and her brother, Kevin Prendergast, as joint executors.
Submissions of the parties
33. The plaintiff contends that there was a total failure of consideration in relation to the transfer. Further, the relationship between donor and donee, coupled with the substantial benefit obtained, gave rise to a presumption of undue influence. The defendant’s evidence did not rebut that presumption. The transaction was improvident. It was not based on adequate legal or other advice and the donor was elderly and vulnerable at the time.
34. The defendant contends that the presumption of undue influence does not arise. His relationship with Monica was not sufficiently close to give rise to the presumption, and there was no evidence of actual undue influence. Even if the presumption arose, however, it was rebutted by independent advice and by evidence consistent with an explanation other than undue influence as the basis for the transfer. The defendant had not acted improperly or unfairly since he had only accepted a transfer into a joint account with the donor. Jack Joyce had intended him to have the money in his sole name, and Monica probably would have agreed. The gift was motivated by natural love and affection, as well as by a desire to recompense the defendant for his work and assistance from 1989 to 1997. In addition, he had taken monies arising from Jack’s business from Annie Walsh’s house, where Jack and Monica had been staying, and had used them to discharge the overdraft on Jack’s business account, rather than misappropriating them for his own use. In view of these considerations, the plaintiff could only succeed if it could be established that the defendant held the monies on a resulting trust for his aunt. Such a conclusion would run contrary to her stated intention.
Joint accounts
35. Before the court goes on to consider the issue of undue influence, it should first be recalled that the money transferred to the defendant came from the joint accounts of Jack and Monica Joyce. A question arises as to whether the money transferred was in fact hers to give at the time she transferred it. In Lynch v. Burke [1995] 2 IR 159 the deceased had made a will leaving all her property to the plaintiff, her sister. Two months later however, she opened a joint deposit account with the first defendant, her niece, and lodged sums to it. The deposit book for the account was endorsed with the words “Payable to Frances McFadden [the deceased] only or survivor” (emphasis in original).
36. The Supreme Court held that the contract between the deceased and the bank concerning the joint account had the effect that during her lifetime only the deceased could make withdrawals from the account. After her death, however, the first defendant would become entitled to the balance on the accounts. While there was a presumption that she held that sum on trust for the estate of the deceased, that presumption could be rebutted by proof of a contrary intention on the part of the deceased. Because on the evidence she had intended the first defendant to have the beneficial interest in the money, that presumption was rebutted. By her presence and signature the first defendant had become a party to the contract between the bank and the deceased. She had acquired a legal interest in the money either by virtue of that fact or because it constituted a gift to her subject to the contingency of her aunt’s death.
37. In the instant case similar principles fall to be applied. Legal title to the chose in action represented by the balance in the accounts would have passed to Monica on her husband’s death by survivorship in accordance with the contracts governing the accounts. Furthermore, unlike the situation in Lynch, she had the same rights of access to the accounts as her husband, being able to withdraw funds from them without his consent. In those circumstances, although the court does not have evidence before it on the question, it is probable that she was a party to the contracts with the banks concerning these accounts, making the banks liable to both account holders. In any event, the defendant has properly conceded that the sums held in the accounts devolved to Monica as surviving joint account holder on Jack’s death.
38. Even if she acquired the legal interest on Jack’s death subject to a resulting trust of all or part of the monies in favour of his estate, Monica was the sole beneficiary under his will, inheriting everything he died possessed of or entitled to. Accordingly, despite the evidence to the effect that Jack Joyce had expressed a desire that his nephew, the defendant herein, should have the sums of money in the accounts, Monica was entitled to them on Jack’s death. Evelyn Prendergast is therefore entitled, in her capacity as administrator of the estate of Monica Joyce, to challenge the transfer to the defendant. No argument was addressed to the court on behalf of the plaintiff as to the presumption of advancement and, in the light of Monica’s clear entitlement to the monies, this aspect need not be considered.
Does the presumption of undue influence arise?
39. In determining whether the transaction in this case should be set aside for undue influence, the court must first consider whether the circumstances are such as to justify a presumption of undue influence. This issue was addressed in Carroll v. Carroll [1999] 4 I.R. 241, in which Denham J. (with whose judgment Lynch and Barron JJ agreed) quoted with approval (at pp. 253-254) the following passage from the judgment of Cotton L.J. in Allcard v. Skinner (1887) 36 Ch. D. 145 at p. 171:-
“The question is – Does the case fall within the principles laid down by the decisions of the Court of Chancery in setting aside voluntary gifts executed by parties who at the time were under such influence as, in the opinion of the Court, enabled the donor afterwards to set the gift aside? These decisions may be divided into two classes – First, where the Court has been satisfied that the gift was the result of influence expressly used by the donee for the purpose; second, where the relations between the donor and donee have at or shortly before the execution of the gift been such as to raise a presumption that the donee had influence over the donor. In such a case the Court sets aside the voluntary gift, unless it is proved that in fact the gift was the spontaneous act of the donor acting under circumstances which enabled him to exercise an independent will and which justifies the Court in holding that the gift was the result of a free exercise of the donor’s will….In the second class of cases the Court interferes, not on the ground that any wrongful act has in fact been committed by the donee, but on the ground of public policy, and to prevent the relations which existed between the parties and the influence arising therefrom being abused.”
40. The categories of relationship to which the presumption applies are neither closed nor rigid (McGonigle v. Black (Unreported, High Court, Barr J., 14th November, 1988)). In McGonigle the presumption applied in the context of a friendship between the lonely and vulnerable donor of the land concerned, who could not cope well without support and had resorted to alcohol abuse, and a friend who lived nearby, who had frequent contact with him and provided him with some home comforts. In the context of the instant case, it is appropriate to recall that the presumption has been applied in the context of a relationship between an aunt and her nephew by marriage (Inche Noriah v. Shaik Allie Bin Omar [1929] AC 127) and even as between a man and his great nephew (Cheese v. Thomas [1994] 1 W.L.R. 129). This is not to suggest that it would apply in all such relationships: leaving aside those categories of relationship which, by their nature, automatically raise the presumption of undue influence, the question of whether the presumption applies depends on the particular circumstances of the case. As Budd J. said in Gregg v. Kidd [1956] I.R. 183 at p. 195:-
“The influence may arise or be acquired in many ways, such as through disparity of age or the mental or physical incapacity of the donor or, indeed, out of a mere dependence upon the kindness and assistance of another. To bring the principle into play it must be shown that the opportunity for the exercise of the influence or ascendancy on the donor existed, as where the parties reside together or meet frequently. While close family relationship creates a situation where influence is readily acquired, mere blood relationship is not sufficient of itself to call the principle into play; it must be shown that the actual relations between the parties give rise to a presumption of influence.”
Furthermore, as Denham J. observed in Carroll at p. 249:-
“Counsel for the defendant, in oral submissions, on the issue of undue influence quite correctly accepted that the relationship between Thomas Carroll senior and Thomas Carroll junior and the circumstances in which Thomas Carroll senior found himself were such as to raise the presumption of undue influence.”
41. It is clear from the passages quoted that the presumption arises from the actual relationship between donor and donee at or shortly before the time of the impugned transaction, coupled with the circumstances of the parties relevant to the acquisition of a position of influence, including the age, position in life, state of health and other particular vulnerabilities of the donor. This is probably because these and other vulnerabilities can give rise to a degree of influence over the donor in a relationship where no such influence would arise if both parties were of the same capacity and in the same position to protect their interests.
42. The transaction occurred within close proximity of the funeral of Monica Joyce’s husband, with whom she had enjoyed a very close relationship and on whom she had depended very greatly. She was described as having been in a state of shock at the funeral. In the immediate aftermath of her loss she was clearly vulnerable. That, however, is only part of the picture. Her vulnerability was compounded by the progressive deterioration of her mental condition. From 1993 onwards those who had contact with her noticed that she was becoming forgetful. The evidence discloses that in the years that followed she experienced periods of confusion and agitation. She became unable to care for herself even before her husband’s death. Within a short time thereafter she needed 24-hour care. The full extent of the deterioration in her health is reflected in the fact that she began to attend a respite home for sufferers of Alzheimer’s disease shortly after Jack Joyce’s death.
43. In addition, she was 70 years of age at the time of the transfer. The defendant did not consider this to be elderly, although Mr. Mellett, the bank manager, took a different view. In my view, at 70 her age is not as weighty a factor as it would be if she were 75 years or older, but it is a factor that has to be borne in mind. Significant disparities in age have, in combination with other factors, contributed to the conclusion that a presumption of undue influence arises (see for example In re Craig, deceased; Meneces v. Middleton [1971] Ch 95). In Cheese Sir Donald Nicholls V-C, with whom the other members of the Court of Appeal agreed, noted at p. 133:-
“It was common ground that the relationship between the two of them was of a fiduciary character: they were close, Mr. Thomas was considerably younger, and he had business experience and a degree of actual influence over Mr. Cheese. Undue influence was therefore to be presumed.”
44. In view of Monica’s age and state of health she was undoubtedly vulnerable to exploitation, in particular at the hands of persons she was close to. I do not accept that the defendant’s relationship with her and Jack was as close as the defendant maintained, but there was an ongoing family relationship between Jack and his nephew, the defendant, and this is evidenced in the will of the late Jack Joyce wherein, in the event that Monica pre-deceased him, he left his property at Hollymount to the defendant, but only in the event that Monica pre-deceased him. I am satisfied that the defendant did keep in reasonably regular contact with his uncle Jack, and that he did visit for weekends, but I am not satisfied apart from a very infrequent occasion that he helped out by manning the sales in the business in Hollymount. He may well have been around the premises from time to time, but the evidence of Patsy Dalton, Evelyn Prendergast and Seamus Hughes satisfies me that he did not, as such, regularly help out with the sales aspect of Jack Joyce’s business. Further, I do not accept that he visited his uncle as regularly as indicated by him: such visits were probably on an infrequent basis. I do not accept the evidence of the defendant that Jack and Monica Joyce went to Dublin in the early 1990s with the intention of buying an apartment in Sandymount, Dublin, or that Jack and Monica Joyce would visit Dublin and stay for periods in the region of ten to twelve days. The defendant did travel some distance to visit his uncle during his illness and arranged his funeral with Kevin Prendergast. All the circumstances taken together are consistent with the view that he occupied a position of trust in relation to his uncle. I accept the evidence that Monica was inclined to agree with everything Jack said. It seems reasonable to infer from this that she would tend to repose trust in those in whom her husband trusted, provided that she herself was familiar with them. Further, the defendant was a nephew of the couple and was well known to them.
45. Monica’s state of health should also be borne in mind. I am satisfied that from in or about 1993 or 1994, she was beginning to fail healthwise, both mentally and physically, and that this was a cause of concern to Jack. In particular, I am satisfied to accept the evidence of Dr. William O’Connor that by 1995, Monica was very frail, depressed, and severely anxious, and suffered from poor concentration and memory. She was taking Prozac for depression, had attended a psychiatrist and was taking Valium and needed sleeping pills to assist her with sleep. I am satisfied that her husband had to accompany her most places when she left the family home and that she was reliant on his support and he was reluctant to leave her on her own.
46. Her state of health exposed her to potential exploitation by those in a relationship of trust with her. The impairment of her mind can only have made her more subject to exploitation and less capable of defending her own interests. In these circumstances I am satisfied that the nature of the relationship between the defendant and his aunt, and her position and condition at the time of the transaction, were such as to give rise to a presumption of undue influence.
47. I appreciate that the presumption is inapplicable in a case in which the full facts are known to the court (Carroll at pp. 263-264, per Barron J. (with whose judgment Lynch J. agreed)). However, in that case Barron J. held, at p. 265, that the presumption applied because the evidence adduced left
“a clear doubt as to whether the donor knew what he was doing and also as to what was his real intention.”
I do not consider the court can be satisfied that all the relevant facts are known in the present case, in light of the fact that the donor Monica is now deceased and was at the time of the transaction suffering from a progressive and serious deterioration of her mental faculties such as to call into question her capacity to understand the transaction at issue. A clear doubt of the kind referred to in Carroll therefore exists. As Barron J. made clear in that case, at p. 264, the presumption still has a function to perform where an element of doubt is present:-
“when all the facts are known surrounding the execution of the impugned document and these show that the donee exercised no influence over the donor then there is no ground to set the deed aside.
In the ordinary way, the person seeking to set aside a voluntary deed does not know all the circumstances surrounding the execution of the document. Accordingly, where the relationship between the donor and donee suggests that the deed might have been procured by undue influence, a presumption arises and the onus of rebutting it is placed upon the donee….The presumption is important when all the facts are not known. It cannot be rebutted until all the gaps in the evidence are filled and the evidence then denies the existence of any undue influence.”
48. An objection was raised to the application of the presumption in the present case on the basis of the following passage from the judgment of Lord Scarman in National Westminster Bank Ltd. v. Morgan [1985] AC 686 at 704:-
“In my judgment, therefore, the Court of Appeal erred in law in holding that the presumption of undue influence can arise from the evidence of the relationship of the parties without also evidence that the transaction itself was wrongful in that it constituted an advantage taken of the person subjected to the influence which, failing proof to the contrary, was explicable only on the basis that undue influence had been exercised to procure it.”
The court is satisfied however that this passage does not correctly state the law in this jurisdiction. It posits that the presumption can arise only where the transaction “constituted an advantage taken of the person subjected to the influence” (emphasis added). This statement calls to mind the argument on behalf of the defendant in Carroll that, because the evidence did not establish that the donee had acted improperly, the presumption had been rebutted. Denham J. rejected this contention, noting that it seemed to confuse the concepts of actual and presumed undue influence. It is clear from the judgment of Denham J. in Carroll (in the passage quoted in the paragraph below herein) that the existence of the relationship, combined with the conferring of a substantial benefit, gives rise to the presumption without more. The judgment of Barron J. in that case is also instructive in this regard, wherein he states at p. 265:-
“In the present case, the defendant relies essentially on three matters. The first is that the plaintiffs accept that their brother did not do anything improper. That alone is insufficient. As I have already indicated the evidence does not show clearly why the donor did what he did, that he knew what he was doing, and that it was the free exercise of his will.”
Furthermore, as Denham J. noted at p. 257:-
“In this case, the presumption existing, it was then necessary to conduct a careful analysis of the facts. On the facts it was a matter of determining if the donee, Thomas Carroll junior, had taken advantage of his position or had been assiduous not to do so. This was not a case where the issue was whether Thomas Carroll junior had taken advantage of his position expressly. Rather it was a case where in the circumstances assiduous care should have been taken not to take advantage of the position of Thomas Carroll senior” (emphasis added).
The transaction was set aside on the ground of undue influence in that case even though it was expressly accepted by the plaintiffs that their brother had not exercised any improper pressure. Returning to first principles, the definitive statement of Cotton L.J. in Allcard on the classes of undue influence is to the same effect: the presumption arises as a matter of public policy and to prevent such relationships from being abused. It achieves this objective by placing a burden on the donee to prove that the transaction did not result from the exercise of undue influence. It seems wholly contrary to the decision in Carroll, and detrimental to the public policy objective stated in Allcard, to adhere to the reasoning of Lord Scarman. The passage quoted from his judgment seems to impose an additional requirement that it be proved that the transaction was procured through misconduct, a requirement not endorsed in Carroll. Accordingly I do not propose to follow National Westminster Bank Ltd. v. Morgan.
In the particular circumstances of this case, for the reasons as set out, I am satisfied that the presumption of undue influence arises.
Has the presumption of undue influence been rebutted?
49. In Carroll Denham J. approved and applied at p. 254 the following passage from Delany, Equity and the Law of Trusts in the Republic of Ireland (1st Ed., Dublin, 1996) at p. 482:-
“Once a relationship giving rise to a presumption of undue influence is established, and it is shown that a ‘substantial benefit’ has been obtained, the onus lies on the donee to establish that the gift or transaction resulted from the ‘free exercise of the donor’s will’. As Dixon J. put it in Johnson v. Butress, the evidence must establish that the gift was ‘the independent and well-understood act of a man in a position to exercise a free judgment based on information as full as that of the donee’. The manner in which this presumption may be rebutted relates to two main issues; first, the question of whether independent legal advice has been received and secondly, whether it can be shown that the decision to make the gift or transfer was ‘a spontaneous and independent act’ or that the donor ‘acted of his own free will’.”
50. In the present case the defendant has received a substantial benefit and the presumption of undue influence applies. Accordingly, the defendant carries the onus of proof referred to in the above quoted passage. There is evidence to suggest that Jack Joyce had conversations with third parties concerning the transfer of monies and/or his estate to the defendant. Jack Joyce may well have had discussions with him to the effect that he wanted him to have the monies in the joint accounts. However, up to the time of his death no actual transfer took place. On the balance of probabilities, I doubt that Jack would have deprived Monica of the use of the monies in the joint accounts because to do so would have denied her access to the great majority of the funds available to her exactly at the time when she found herself without the assistance and support of her husband on which she relied so heavily. I am fortified in this view because on the evidence of Seán Mellett, the Manager at Bank of Ireland, Claremorris, the manner in which the joint deposit account had been set up allowed for either person to withdraw any amount, including the entire amount, from the account. Accordingly, Jack Joyce could, at any stage during the 1990s, have signed the necessary withdrawal docket and simply given the defendant a portion of or the entire of the monies in the joint deposit account with Bank of Ireland. There was, in fact, no need to advise Monica as to what he was doing, and yet he never took such a step. Furthermore, when he was ill in hospital shortly prior to his death, he must have known, as was the factual situation, that he could have directed Monica to go to the bank and sign the appropriate withdrawal form so as to transfer part of or the entire of the monies in the joint deposit account to the defendant, and there is no evidence that any such discussion occurred and it was, at all times, open to Monica to have gone to the Bank of Ireland with the defendant, on 12th January, 1998, and to have met with Seán Mellett, the manager, and signed the necessary documentation. It is furthermore clear from the last will and testament of Jack Joyce, particularly in the manner in which the will is worded, that he wished to leave everything he died possessed of to Monica absolutely.
51. Accordingly, I find, as a fact, that while Jack Joyce may have indicated to Seán Mellett of the Bank of Ireland, Claremorris, and to Ms. Clancy, the manager of AIB in Ballinrobe, that he wished the defendant to have everything when he passed away and/or that he wished him to have the entire of the monies in the joint deposit accounts, he did not mean what he was saying because, in fact, he had every opportunity to do so in respect of the joint accounts and never availed of that opportunity and insofar as his last will and testament is concerned, he left no bequest to the defendant other than his property at Hollymount in the event that Monica pre-deceased him, which did not occur.
52. However, even if I had taken the view that Jack had harboured such an intention, that could not be such as to rebut the presumption because Jack Joyce was not the donor of the monies involved. Although Monica may have confirmed her agreement to the transfer some three months prior to her husband’s death, for a number of reasons I do not consider any real weight can be attached to such a situation. The evidence establishes that she tended to agree with everything Jack said, at least insofar as business and banking affairs were concerned. In addition, she could not speak freely on this occasion. The intended beneficiary, the defendant, was actually present when the point was raised, and Monica was not being invited to give her assent in any way or by any means which could be such as to bind her. It would be patently unfair to hold her to an assent given in such circumstances. Furthermore there is no evidence available to suggest that Jack ever directed Monica at any time to transfer the monies in the three joint accounts to the defendant.
53. Although I consider this sufficient to dispose of the assertion that Jack and Monica had expressed an intention to transfer the monies to the defendant, it should be added that Monica’s mental impairment was already well advanced by October 1997, and, for the reasons stated below, the court does not accept that she had had the benefit of independent advice.
54. A contrary submission was advanced on behalf of the defendant, who asserted that Mr. Mellett of the Bank of Ireland had provided the requisite independent advice. A year or two prior to the impugned transactions, he had discussed with Jack and Monica the proposal to transfer the monies into the sole name of the defendant. The transaction was also explained to Monica by Mr. Mellett on the day the transfer was effected.
55. In the context of a person in Monica’s state of mental health, I am unable to conclude that on the balance of probabilities she would recall the content of a discussion that took place a year or two prior to the transactions. Even if she did, neither that discussion nor the explanation Mr. Mellett is said to have given her on the occasion of the impugned transaction would have been sufficient to satisfy the requirement as to independent advice. In Inche Noriah at pp. 135-136, Lord Hailsham L.C., delivering the judgment of the Privy Council, stated:-
“It is necessary for the donee to prove that the gift was the result of the free exercise of independent will. The most obvious way to prove this is by establishing that the gift was made after the nature and effect of the transaction had been fully explained to the donor by some independent and qualified person so completely as to satisfy the Court that the donor was acting independently of any influence from the donee and with the full appreciation of what he was doing; and in cases where there are no other circumstances this may be the only means by which the donee can rebut the presumption. But the fact to be established is that stated in the judgment already cited of Cotton L.J., and if evidence is given of circumstances sufficient to establish this fact, their Lordships see no reason for disregarding them merely because they do not include independent advice from a lawyer. Nor are their Lordships prepared to lay down what advice must be received in order to satisfy the rule in cases where independent legal advice is relied upon, further than to say that it must be given with a knowledge of all relevant circumstances and must be such as a competent and honest adviser would give if acting solely in the interests of the donor.”
56. Denham J. quoted this passage with apparent approval in Carroll. The judgment of Barron J. in that case is also instructive. He stated at p. 265 that it was clear from Gregg that:-
“(1) a solicitor who acts for both parties cannot be independent of the donee in fact; and
(2) to satisfy the court that the donor was acting independently of any influence from the donee and with the full appreciation of what he was doing it should be established that the gift was made after the nature and effect of the transaction had been fully explained to the donor by some independent and qualified person. Further, the advice must be given with a knowledge of all relevant circumstances and must be such as a competent advisor would give if acting solely in the interests of the donor.
Accepting these principles, there can have been no independent advice given by Mr. Joyce since at best he was acting for both parties. In any event his evidence was lacking in two important respects:-
(1) he did not have knowledge of all the relevant circumstances; and
(2) he did not give advice, he merely set out to carry out the donor’s instructions.”
57. I am not to be taken as suggesting that Mr. Mellett acted otherwise than bona fide in relation to this transaction. However, his intervention in the present case was not sufficient to comply with the principles established by the above authorities. He had a financial interest in the transaction, in that he had targets to meet in regard to the number of transactions he oversaw. The defendant argued that this was immaterial, since he would have benefited in the same way if Monica had transferred the monies into a product in her sole name. No doubt that is so, but the argument presumes that there was a possibility such an alternative transaction might take place. It may well be that there would have been no investment in the financial product at issue, and indeed no transaction of any kind, if the impugned transfer had not gone ahead as planned. It has not even been suggested that the proposal to invest the money in a financial product came from Monica. Even if she had been fully aware of the nature of what she was doing I see no reason to believe that she would have contemplated entering into a transaction which left the money in her name but in a different form. Had she been advised to consider keeping the money in a financial product in her own name I consider it probable that she would not have transferred the money from her account at all. Mr. Mellett’s understanding of the reason for the transaction was that it was intended to benefit the defendant, and he had no reason to suppose that the donor would have considered an alternative transaction wholly inconsistent with that intention if recommended. Accordingly, it seems probable that no alternative transaction would have occurred, and this would have impacted adversely on Mr. Mellett’s business targets. Again I do not wish to call his motives into question, but in circumstances where the purportedly independent advisor has an interest in the transaction, his advice cannot be said to meet the criteria of independence referred to in the authorities.
58. In addition, Mr. Mellett was aware of the supposed intention of Jack Joyce that the money should pass to the defendant. When pressed in cross-examination as to why the transaction had proceeded even though the money had passed to Monica, he indicated that it was Jack Joyce’s intention that the defendant should have the money in the joint account. I do not think I am being unfair to him in suggesting that, having discussed it with Jack and the defendant, he approached the matter with a preconception that the transaction should go ahead. It would appear that he saw his role in this context as helping to give effect to the expressed intention of Jack Joyce. Considering that this was the objective he had in view, the court is not satisfied that he gave sufficient consideration to the interests of the donor.
59. In addition, he did not know Monica beyond having met her briefly on just a few occasions. He does not appear to have known or inquired into the nature or extent of her other assets, nor was he aware of the extent of her mental impairment and her consequently greater need for advice and protection in financial matters.
60. It should be noted that the focus in this regard is on ensuring that the particular donor fully appreciates the quality of the transaction. This means that greater care must be taken to ensure that persons who are particularly susceptible to exploitation, such as those who are aged, or suffer from ill health, or are vulnerable, genuinely understand the nature and effect of the transactions into which they enter, particularly when those transactions are of substantial value. The advice must also be such as a competent advisor would give if acting solely in the interests of the donor. In my view a person in such a position vis-à-vis Monica Joyce would of necessity have cautioned her about the gravity of what she was doing. The evidence does not establish that this was done in the present case and indeed it has not been suggested that it was. I am not satisfied on the evidence that Monica Joyce received adequate independent expert advice to give her a full appreciation of what she was doing at the time she gave effect to the transfer.
61. The courts do not demand “absolute disproof” of undue influence in order to rebut the presumption (Provincial Bank of Ireland v. McKeever [1941] I.R. 471). The defendant argued that, in all the circumstances of this case, the court should find that the presumption has been rebutted.
62. It was submitted that Monica Joyce was mentally fit to carry out the transfer on the date in question. Both the defendant and Mr. Mellett were satisfied of this, and no-one else had given evidence as to Monica’s mental state on the particular day of the transfer.
63. In my view this suggestion seeks to isolate that particular day from the overall context of the lengthy and progressive deterioration of her mind. It is a fallacy to suggest that she was mentally fit to give effect to the transfer when the circumstances surrounding it are considered. Dr. O’Connor gave evidence that, in his professional opinion, it is doubtful that Monica was capable of understanding the transaction she entered into on 21st January, 1998. Much was made of the fact he had previously stated that he could not “express a categorical opinion” in that regard, since he had not seen her on the day of the transaction. However, it does not follow that he could not express an opinion on the balance of probabilities, based on his knowledge of Monica since 1995 as her doctor. Furthermore, he examined her on 3rd February, 1998, and concluded that she was incapable of living alone or making her own decisions, a conclusion he later expressed to her brother Kevin Prendergast. On 17th February he conducted a mental state examination and concluded she was unfit to understand a legal document or execute a will. The defendant pointed to the gap of two weeks between the transaction and the doctor’s conclusion, and the 27 days between the transaction and the mental state examination.
64. In context however these periods are very unlikely to have had any real bearing on her condition. The mere fact that it was not formally pronounced upon until a short time after the transaction does not mean that the impairment of her mind was not present at the relevant time. Viewed against the background of her illness, such short periods of time are of little relevance. The donor had been suffering from a mental impairment at least since 1993, a condition which progressively deteriorated over the years that followed. It was suggested she could not be left in charge of a till or a kettle by the beginning of 1998, a conclusion which seems consistent with the expert evidence of her regular doctor. Like Budd J. in Gregg, I am inclined to give more weight to the opinions of her regular doctor than those of persons who were not sufficiently familiar with her circumstances to correctly evaluate her mental state.
65. In Gregg, Budd J. was concerned with a deed executed by a man who suffered from a disease of the mind that left him with occasional periods of lucidity. Budd J. observed at p. 197:-
“I believe that his capacity to make rational decisions was by the autumn, definitely impaired and that his capacity to resist influence and suggestions was very slight and easily overcome. At times, I think, he might have been fit to make a simple officious will or simple disposition of his property if uninfluenced and properly advised, but it would, in my view, have been difficult to discover just when he was in that condition and equally difficult to bring him to a full understanding of the transaction. Someone well acquainted with him would obviously be the best person to make the attempt, but even such a person would require to exercise care and patience in examining him before coming to a conclusion as to his capacity. Even if he could be shown to have had the capacity to bring a reasoning mind to bear on such a disposition there would still remain the formidable difficulty of ascertaining and ensuring that his mind was emancipated from the influence and dominion of others alleged to have existed.”
66. The same considerations apply in the context of the donor’s state of health in the present case. The defendant was the only person well acquainted with her who had the opportunity to observe her mental state on the date of the transaction. It has not been suggested that he undertook a patient and careful examination of her to ascertain whether she was fit to proceed, albeit that he, like Mr. Mellett, thought she understood what it entailed. The evidence of her doctor however, together with the long progression of her illness over the preceding years and the effect on her mental state of the recent death of her husband, leads to the conclusion that the donor was on the balance of probabilities incapable of fully understanding what she was doing on 21st January, 1998.
67. I do not overlook the letter of 15th June, 1998, from Maguire & Brennan, solicitors for Monica Joyce, to the Bank of Ireland. That letter states that the solicitors received instructions from Monica Joyce and Kevin Prendergast to the effect that the money should be placed in an account in the sole name of the former. That letter was a response to Mr. Mellett’s letter of 27th March, 1998. Accordingly, it is said that at some point between those two dates Monica must have been capable of giving instructions. I accord little merit, however, to this matter when weighed against the cogent and persuasive evidence given as to her mental state nearer to the time of the transaction, in particular the evidence of Dr. O’Connor. It may be that when these instructions were given to her solicitors, she had enjoyed at least some amelioration in her condition, perhaps due to the intervention of the respite home and the period that had elapsed since the death of her husband. While this is speculative, I mention it only to indicate that there are alternative explanations for the giving of these instructions, and that it cannot be deduced from the donor’s apparent capacity to give instructions at that time that she was so capable on the date of the transaction, four days after her husband’s funeral.
68. It was contended that the donor carried out the transfer in exchange for the services rendered by the defendant to her and to Jack. I cannot avoid the conclusion that this suggestion as to the motivation for the transfer is incorrect. The evidence of friends of Jack and Monica Joyce indicates that the defendant did not assist at the garage as often or as productively as he contends.
69. Alternatively it was suggested that the transfer was carried out in consideration of natural love and affection. However I do not consider that this submission affords a plausible explanation for the transfer. Although the relationship between donor and donee in this case was sufficiently close to raise a presumption of undue influence, I am mindful of the fact that Monica had other relatives in a closer relationship to her. Some of them went on to assist and care for her in the years following the death of her husband. It is difficult to understand why she would have made greater provision for the defendant, a nephew by marriage, than she would for those who were closer to her both in family ties and in the care they showed for her. The explanation proferred might conceivably be acceptable if the defendant were in particular need of financial assistance, but there is nothing to indicate that was the case at the time of the impugned transfer. Even then it would have been difficult to conclude that such a large sum, representing such a substantial portion of the donor’s assets, should have been given to her husband’s nephew in consideration of natural love and affection.
70. It follows from the foregoing that the defendant has not established that the gift “resulted from the ‘free exercise of the donor’s will’”, constituting “the independent and well-understood act of a man in a position to exercise a free judgment based on information as full as that of the donee” (Carroll at p. 254). Accordingly, the presumption has not been rebutted and the transactions should be set aside for undue influence. For the sake of completeness I will also consider the aspect of alleged improvidence.
Improvidence
71. Before considering this question, the court must address an objection on behalf of the defendant to the effect that this issue was not argued at the hearing. As the defendant acknowledges however, it is specifically pleaded at para. 11 of the statement of claim that the transfer was grossly improvident, and denied in the defendant’s defence at para. 4. In addition, it was clearly understood that the legal argument in this case would be by way of written legal submissions. The plaintiff was entitled to raise the ground of improvidence as she did. The point having been raised, the defendant had the opportunity to respond to it in written submissions and very properly did so.
72. The jurisdiction to set aside a transaction for improvidence was recently considered in the High Court in Carroll v. Carroll [1998] 2 ILRM 218. In that case Shanley J. (at p. 230) quoted with apparent approval the following passage from Hanbury and Martin, Modern Equity (4th Ed., London, 1991) at p. 821, concerning the criteria for setting aside a transaction on this ground:-
“First, that one party was at a serious disadvantage to another by reason of poverty, ignorance, or otherwise, so that circumstances existed of which unfair advantage could be taken; secondly, that the transaction was at an undervalue; and thirdly, that there was a lack of independent legal advice.”
Both the High and Supreme Courts applied those principles in Carroll.
73. The defendant submits that this jurisdiction extends only to setting aside improvident or unconscionable bargains, in the sense of a transaction for value. In support of this proposition reliance was placed on Langton v. Langton [1995] 2 F.L.R. 890, a decision of A.W.H. Charles Q.C. sitting as a deputy High Court judge. However, it has been pointed out (Capper, “Undue Influence and Unconscionability: A Rationalisation” (1998) 114 L.Q.R. 479 at p. 492) that this view was expressed obiter and that it is inconsistent with two decisions of the High Court of Australia. In Wilton v. Farnworth (1948) 76 C.L.R. 646 the court set aside a deed on the ground of unconscionability where no value was given in exchange for it. The judgments of Latham C.J. (at p. 649) and Rich J. (at p. 655) expressly refer to the transfer of the plaintiff’s share in his wife’s estate to his stepson as a gift. Again, in Louth v. Diprose (1992) 175 C.L.R. 621 the court set aside a gift of a house on the ground of unconscionability. The decisions of our courts support the view that the doctrine extends to gifts. In Noonan v. O’Connell (Unreported, High Court, Lynch J., 10th April, 1987) the court set aside a gift of a half share in the plaintiff’s farm on the ground of improvidence. The court noted (at pp. 8-9) that the consideration of 50 pence could be disregarded as it did not constitute any real consideration for the purposes of determining whether the transfer was improvident, and that although the plaintiff and defendant might have agreed that the defendant should support the plaintiff and carry out work for him, there was no mention of this in the deed. Accordingly, the court in effect treated the transfer as a gift and set it aside for improvidence. In McGuirk v. Branigan (Unreported, High Court, Morris J., 9th November, 1992) a gift of much of the plaintiff’s garden was set aside as improvident. While the agreement provided for some consideration, there was no evidence that it had been paid or genuinely envisaged, and the court attributed its inclusion in the agreement as a mere device to evade special requirements in a conveyance for natural love and affection. Accordingly, the transfer being set aside was in fact a gift. Similarly, the judgment in Grealish v. Murphy [1946] I.R. 35 at p. 50 indicates that the doctrine extends to gifts.
74. It has also been suggested in a series of cases (Hart v. O’Connor [1985] AC 1000; Alec Lobb (Garages) Ltd. v. Total Oil (Great Britain) Ltd. [1983] 1 W.L.R. 87; Louth v. Diprose (1992) 175 C.L.R. 621) that to have a transaction set aside for improvidence, it must be established that the defendant acted in a manner which involved some element of moral turpitude. I am satisfied that this proposition does not represent Irish law. In Carroll, Shanley J. noted at p. 223:-
“there is no suggestion from them [the donee’s sisters, who were also the plaintiffs] that their son [Sic] in any way bullied or cajoled their father into transferring the property to him.”
75. As noted above, the plaintiffs in that case expressly rejected the idea that their brother had acted wrongfully toward their father in relation to the transaction, and it was common case that he was mentally alert at the time. Of course, the absence of express undue influence does not rebut the presumption. However, if some form of misconduct were to be regarded as an essential element of the doctrine of improvident transactions, it would not have been held in such circumstances as those which prevailed in Carroll that the gift was liable to be set aside for improvidence. Indeed, both the High and Supreme Court in that case reached the conclusion that it was a clear case of improvidence, without any suggestion that the defendant had acted improperly or that impropriety in his conduct would have to be present. Denham J. noted at p. 250, but did not accede to, the submission that some unconscientious use of power by the stronger party against the weaker had to be shown. Similarly, in Noonan no presumption of undue influence arose and “there was no express undue influence of any sort by the Defendant” (at p. 7). The court did not attribute any moral wrongdoing to the defendant. Indeed, the proposal for the transfer of half of the plaintiff’s interest in his land had come from the plaintiff himself. He had originally suggested he should transfer all his lands to the defendant. The defendant had dissuaded him from doing so. The court nonetheless set aside the transfer on the ground of improvidence.
76. It is clear then that the court enjoys jurisdiction in equity to set the transfer aside once the three criteria identified by Shanley J. in Carroll have been established:-
(1) that one party was at a serious disadvantage to another by reason of poverty, ignorance, or otherwise, so that circumstances existed of which unfair advantage could be taken;
(2) that the transaction was at an undervalue; and
(3) that there was a lack of independent legal advice.
77. In the present case the donor was at a serious disadvantage to the donee owing to her mental impairment, the then very recent loss of her husband and her advanced age. I have already indicated that I regard as unreal the proposition that her mental impairment was somehow absent at the time of the impugned transfer. Accordingly, the circumstances were such as to enable unfair advantage to be taken, whether or not such advantage was in fact taken. For the reasons as set out it need not be shown that the donee in fact took advantage of the donor’s vulnerability.
78. The transaction was at an undervalue. As was properly conceded on behalf of the defendant, the donor was entitled to the monies transferred following the death of her husband. I appreciate that she had the benefit of her husband’s will, and funds available to her in the form of a monthly pension of approximately US$500 together with death benefits of £34,017.63. However on the basis of the evidence adduced the will was only read to her after she had completed the impugned transactions. The sum transferred represented the great majority of her liquid assets. The effect of the transfer was to divest her of that money. While it was placed in an account in the joint names of herself and the defendant, she could not access it without his assent. At a stroke she deprived herself of these monies in exchange for no benefit immediately following the loss of a husband on whom she had become almost totally dependent. The evidence in this regard discloses a clear case of improvidence.
79. Finally, for the reasons already outlined the court finds that the donor did not have the requisite independent advice. In a passage approved by Denham J. (with whose judgment Lynch and Barron J.J. agreed) in Carroll at pp. 258-259, Gavan Duffy J. stated in Grealish at p. 49:-
“Equity comes to the rescue whenever the parties to a contract have not met upon equal terms, see Lord Hatherley’s judgment (dissenting on facts) in O’Rorke v. Bolingbroke; the corollary is that the Court must inquire whether a grantor, shown to be unequal to protecting himself, has had the protection which was his due by reason of his infirmity, and the infirmity may take various forms.”
80. Having regard to her age, state of health, and shocked state very shortly after her husband’s funeral, Monica Joyce was in my view unequal to protecting herself and was suffering an infirmity for the reasons as set out and did not have the benefit of independent advice such as to ensure she understood the nature and effect of the transfer.
81. Accordingly I am satisfied that the transactions should be set aside for improvidence.
Grealish v. Murphy.
[1946] IR 35
Gavan Duffy J.
The plaintiff sues (1) to have an indenture of settlement of October, 1942, set aside, either (a) as improvident, or (b) for his own mental infirmity and incapacity to understand the deed, coupled with undue influence by the defendant; (2) to assert his sole title to a sum of £2,000 standing at the National Bank, Galway, in the joint names of plaintiff and defendant; (3) to recover two sums of £500 and £645, as moneys improperly obtained or retained by the defendant from the plaintiff; and (4) to have an account taken. The defendant justifies his action under each head.
Peter Grealish, the plaintiff, is by way of being a farmer; he is a bachelor in the sixties; he is a man of a generous turn, but obstinate; he can hardly read and he signs as a marksman; he is afflicted with a worse than Boeotian headpiece and a very poor memory; a long life has not taught him sense. At the opening of the year 1942 this poor old victim of his circumstances was living under rather dismal conditions; Peter, for as Peter he is known, had a couple of labouring men sleeping under his roof, but otherwise lived alone on a remote farm and ranch of some 180 acres at Carnmore in the Oranmore district of the County of Galway, neglected by his relatives and almost bereft of friends; he was loaded with possessions, far above his modest wants and far beyond his modest capacity for management; moneys exceeding £5,500 lay to his credit on deposit at a bank in Galway, though considerable portions of this fortune were destined to be dissipated in the course of the year 1942; he had some cattle and his land had for many years brought him into frequent conflict with certain of his smaller neighbours, who were in the habit of taking conacre from him; he felt, as I surmise, that he could not by himself hope to hold his own in any considerable purchases or sales of cattle; he also owned a little farm a few miles away from Carnmore; and he needed, and realised that he needed, a reliable factotum as manager and as protector.
Peter had tried hard, and failed, to solve his problem; he had sought to marry first a cousin of his, then a niece, and finally another niece, to one, Thomas Fox, who had promised to bring in a marriage portion, payable to the plaintiff, first of £400, then of £1,000 and lastly of £500, and to look after Peter and his affairs, in exchange for a settlement of the big farm, as from Peter’s death, on Fox and his bride, and their maintenance on the farm during Peter’s life; Fox had eventually refused the first two ladies; the third deed had been executed on December 3rd, 1941; but a few weeks later the third lady had positively said “No.”
Peter was bitterly disappointed, but he was not defeated. His family had known a family of Murphys, who lived as far away as Headford, and he resolved to invite one of the sons to step into the breach. Accordingly Thomas Murphy, the defendant, whom Peter had never seen, presented himself at Carnmore on January 26th, 1942; Peter liked his looks and at once came to business; he admits that he promised to give Murphy the farm after his own (Peter’s) death, if Murphy would in the meantime work the land for him. In view of that admission, borne out by Peter’s later instructions to his own solicitor, I need not determine precisely how much further Peter’s promises may have gone, though Murphy is much more explicit; his evidence is that Peter explained that he was boycotted and that his land had been forcibly seized and that he wished to put an end to the conacre holdings on his land and to have a man to manage and work the farm and live with him; he says that Peter went on to promise that, if Murphy would come, Peter would leave him the farm, buy him a new lorry and also, if he wished, a new car, settle on Murphy any sum of money he required and let him marry any girl he liked; Murphy says that Peter wanted to go to a solicitor the very next day to “sign me over the farm.”
Murphy’s reply, he says, was that he must see his own solicitor, Mr. McDonagh, at Tuam, and he saw him on January 27th, and discovered the Fox settlement of the previous month; he returned at once to Carnmore, when Peter assured him that he had already given instructions for a suit to set that deed aside; they agreed, Murphy continues, to call on Mr. Concannon, Peter’s solicitor, at Galway on the following day; they did so, according to Murphy, and during that visit he and Peter agreed, in the presence of the solicitor and his clerk, Costello, that pending the setting aside of the Fox settlement, Murphy should manage for Peter Grealish, take him into town to buy and sell generally and do any business that Peter might ask him to do. This agreement of January 28th, 1942, is decisive upon the onus of proof for any transaction prior to the impugned indenture of October, 1942. This agreement is not corroborated; Peter is incapable of affirming or disputing it; Concannon denies it; Costello, called as a witness by Murphy, was asked nothing about it, and his answer, were it available, would have carried little weight; but, as against Murphy, I must accept his own evidence as proving at least that on some day at the outset of his dealings with Peter he undertook, in consideration of Peter’s promises, to act for him in business matters generally, pending the action against Fox. And during the time that elapsed before October, 1942, when that action was heard, Murphy must have discovered beyond doubt, if he did not know from the first day, that Peter needed decidedly more protection than the ordinary western farmer and cattle dealer.
Mr. Fitzgerald pressed on me vigorously the view that Peter is merely a simple-minded and not a feeble-minded old man, but that is not the impression made on me by his performance as a witness; I must go with the medical evidence to the extent of classifying him among the mentally deficient, though I should not myself assimilate him to a child of twelve. I cannot measure his deficiency in scientific terms and I need say no more than this, that, as I appraise him, the brain, while it must have developed with time, has never since childhood attained the normal powers of an adult; and he is liable to be erratic, especially outside the daily routine of his life at home. The trial threw occasional side-lights on Peter’s faculties; for instance, he can read the clock, but cannot tell the time; Murphy virtually admitted that Peter was unable to count £2,000 in £50, £10 and £5 notes; and, having made to Murphy in October, 1942, an astounding present of, as Murphy says, £700, Peter was unable, as I must necessarily infer from the pleadings, to give his advisers in this action any instructions whatever on the matter, which came to light only through a question in Murphy’s cross-examination by Mr. Costello at the trial; I gather, moreover, that Peter had completely lost all trace of a further large sum of money, which he drew from the Bank at the same time.
Murphy, who comes of farming stock, had been a road worker and he was a haulier in a small way, with a car and a lorry of his own, when Peter’s proposal burst upon him and a bright vista suddenly opened out before his eyes. True, he was being asked to give up his freedom, he had no idea what, sort of principal Peter would prove to be and he could not tell what stings he would have to endure from waspish neighhours. But he was only 32 years of age and the possible difficulties may well have loomed dim in the dazzle of the glittering reward proffered by his glowing benefactor; the golden prospect was that he would be a rich man after a few years of not too arduous labour and surely he could well bear any little passing troubles that the venture might entail. Murphy accepted Peter’s proposal, but did nothing at this time to rush the old man; I do not think he called on him again until the following March. Then he began to see him, as he says himself, about twice a week until June, and I see no reason to believe that his attentions slackened during the summer; he used to take Peter for shopping or business purposes to Galway by car; he drove him at different dates as far as Dublin and Limerick and to several fairs; he says he bought cattle for him to the value of £480 at Gort Fair in May, and early in October sold cattle for him at Tuam Fair, taking £530 net, and immediately afterwards bought cattle for him at Westport Fair. He was kind to Peter and that solicitude did not go unrewarded; Peter gave Murphy £450 towards a motor lorry in May, 1942, and (at about the same time, I think, or earlier) £250 for a Chrysler car. In June Peter actually placed a sum of £2,000 in the joint names of himself and Murphy at the National Bank, in Galway, though not necessarily out of munificence towards Murphy and primarily, I think, as a strategic diversion to defeat the apprehended machinations of a rapacious Estate Duty Office.
In June, 1942, the Court adjourned the Fox action, and Peter, blaming Mr. Concannon and chafing at the delay, entrusted his case to another solicitor, Dr. Comyn of Loughrea. On October 10th, 1942, the Circuit Court in Galway annulled the Fox deed on Peter’s evidence, Fox not appearing, and on October 13th Peter gave the instructions upon which Dr. Comyn drew the settlement that is the chief bone of contention in this action. The deed was executed on October 20th, and bears date October 24th, 1942, and Peter, theretofore full owner of the Carnmore land, was registered as limited owner by reference to this document. The stamp duty puts the net value of the farm at some £1,000. The deed, in pursuance of the January agreement, gave Murphy a position at Carnmore equivalent to, but really better than, that of an adopted son.
On October 30th, 1942, Peter drew out £1,900, standing on deposit in his own name at the Bank of Ireland in Galway, thus closing the account, which was distinct from the still subsisting joint account for £2,000 with the National Bank. There is some evidence that Peter, when taking the money out, alleged that he was buying a farm. Murphy avowed in cross-examination that Peter had given him £700 of this money and had lodged £1,000 out of the £1,900 in the National Bank (presumably at Galway). I understand that, until this admission by Murphy as to his £700, the whole sum drawn had vanished, and, unless the money has been discovered during the long vacation, the sum of £1,000 still has to be found. Murphy may be mistaken as to the precise bank, but his evidence of a bank lodgment is specific, and the mystery cannot be brushed aside as if a mere bagatelle were involved. I am not to be understood as throwing blame on Murphy for the loss of the money; I do not know who is to blame. This extraordinary disappearance of the money of an irresponsible old man calls, in my view, for close and persistent investigation, with the aid, if necessary, of the Gárda SÃochána; but that matter is outside the purview of this action on the pleadings and the evidence.
Murphy says that he did not go to live at Carnmore in pursuance of the settlement until early in December, 1942, when he lodged, hard by Peter’s own house, with a Mrs. Fahy; a young Fahy lived with Peter and worked for him. Local hostility had declared itself against Murphy as early as October, but, after his arrival, a quite unforeseen and particularly unpleasant series of attacks came from one of Peter’s sisters, a bedlam, living some three miles away, who would descend in wrath upon Carnmore at intervals, giving tongue to loud maledictions upon the grabber of her brother’s land. Murphy, I think, actually went in fear of his life from some of the local roughs, a number of whom had stoned his car, and he found the onslaughts of the termagant almost equally hard to endure.
Early in January, 1943, I find (in a conflict of evidence) that Murphy, as Peter says, told Peter that he must have money or he would leave; I find that Peter offered him £500 and that Murphy refused this sum and went off to Galway; and that Peter at once sent him an urgent message with an offer, if he would come back. Murphy’s evidence, for which there is some corroboration, is that the messenger brought him an offer of £500 and of all Peter’s cattle, and that Peter also promised to keep his sister away; so he returned and accepted the offer. I find that Murphy did return and come to terms with Peter, but, as his witness, the messenger, says”I suppose he really meant to stay anyway”; my reading of the position is that Murphy knew that Peter was afraid of being beaten or killed, if deprived of Murphy’s protection, and knew that Peter was sure to succumb to the demand for money, to prevent his desertion by Murphy. Murphy now says that he had not decided to abandon the undertaking, but he could not live there nor work the farm “on account of the trouble,” he did not like the place “inside or outside,” he was under police protection (in fact the Gárdaà had not yet come) and he wanted to go home to see his own people and to consult his solicitor. He admits having gone away, but denies having demanded money before he left. Peter (whose evidence here I do not accept) says that Murphy got the £500 before leaving and he denies having sent a messenger with an offer to bring him back. The fact that Murphy got the money is not in dispute. But I do not know where Peter got the £500; he says that he drew it from the Bank of Ireland, Murphy having driven him to Galway for the purpose; Murphy, as I follow him, says that Peter drew the money from the National Bank and paid him on January 15th, 1943. But neither bank account shows any such drawing and no witness has suggested that the justly timorous owner kept any large sum of money at home.
On the night of January 12th, 1943, a day or two after Murphy’s return, shots were fired into Mrs. Fahy’s house; the incident was described by the police as “an attempted murder on the house of Fahy”; young Fahy was afraid to work for Peter or live with him any more, though the other labourer stayed; Peter’s house and Fahy’s were kept under police protection for eighteen months thereafter, as was also Murphy’s person on dark nights, while he remained at Carnmore.
On March 10th, Murphy sold on the land 39 head of cattle (Peter’s alleged present to him), realising £643, for his own account. The deal was not carried out as openly as the circumstances required. I see no need to determine whether Peter had given Murphy the cattle or not; Peter vehemently denies the gift; but I think the probabilities are that Peter had regretted and repudiated his excessive liberality in a crisis and that Murphy felt uneasy about the whole discreditable affair. On May 3rd Murphy fell ill and went home; he and Peter parted on good terms. But Murphy’s amazing statement that, when leaving, he was “under the impression”(sic!) that Peter knew that the cattle were gone, throws a nasty light on the rape of the cattle. On May 28th Murphy returned; Peter was angry and at once taxed him with having sold Peter’s cattle surreptitiously. By this time Peter had another man, a relative, living in the house. Early in June Peter consulted Mr. Conway, his present solicitor, with a view to taking action against Murphy. By June 22nd Peter and Murphy were not on speaking terms and on that night Murphy was locked out by Peter and went five miles away for a bed, under police protection. At the end of June, Murphy, feeling that he was in effect supplanted by the new arrival, left Carnmore.
That is the story in outline. But the difficulty of ascertaining the facts has been prodigious. I could not depend much on Peter’s memory, nor on the accuracy of either contestant; the other local witnesses did not impress me; and several witnesses who might have been called did not appear.
Let me now examine the making of the settlement which the plaintiff seeks to set aside. We have Peter’s promise to Murphy at the very outset of their connection; that was a promise, according to Murphy, to “leave me the farm”and “settle any sum of money I wanted on me,” and Peter had wished to go to a solicitor at once to “sign me over the farm.” Then, according to Murphy, “he used to say every time I would meet him that he had decided to leave the place to me and that the marriage settlement would be set aside.” And there is ample evidence (whatever the terms actually were in which Peter expressed himself to Murphy) that Peter was fuming with impatience to rid himself of his commitments to Fox, obviously in order to be free to conclude his arrangements with Murphy. There is evidence that Costello, Mr. Concannon’s clerk, who claims to have been an old friend of Peter’s and was called as a witness for Murphy, in March, 1942, definitely ascertained that Mr. Concannon would have nothing to do with any settlement of the land by Grealish upon Murphy, and I cannot doubt that Costello made this fact known to Murphy, if not to Peter, who changed his solicitor in June, 1942, as I have said. Costello lost his place in the Concannon office early in July. Peter paid several visits to Dr. Comyn during the summer, always accompanied, I think by Murphy and by Costello; Costello’s presence on these occasions is unexplained, but Peter clearly trusted him and afterwards rewarded him liberally for his miscellaneous services. According to Dr. Comyn’s recollection, Costello occasionally made some remarks on these occasions, but Peter did the talking, while Murphy “never uttered a word”, a singularly modest attitude for the heir-presumptive during the long wait from June to October; if this persistent silence is an example of western caution, it suggests tactical caution carried rather too far.
On October 13th, 1942, three days after the Court had set aside the Fox deed, Peter, duly accompanied by Murphy and Costello, called on Dr. Comyn. In the outer office Peter intimated to the solicitor that he intended to “take in” a man and Dr. Comyn understood the man to be Murphy, whereupon Dr. Comyn took Peter by himself upstairs and wrote down his instructions; he had no conversation at all with Murphy. If Murphy is to be believed (and there are limits to my credulity), Peter (who may fairly be said to have been living for this day) did not tell Murphy when he came down, that he had actually given the instructions; but Murphy did admit in cross-examination that Peter had said he was going in (that is, to Dr. Comyn) in order to transfer the land to Murphy.
The effect of the detailed instructions, as taken down, was that, being old, delicate and unable to work his land without loss, Peter wished to take Murphy, who was not a relative, into his house as factotum and general worker and, while keeping a life interest, to transfer the big farm after his death to Murphy, who was to be supported and to live at Carnmore in the meantime; Peter meant to deal with the other farm and with his stock and moneys later. The instructions were read to Peter, who approved of them, and upon them Dr. Comyn instructed counsel, verbally, as I understand, to settle the deed.
On October 20th the engrossment was read to Peter, who executed the deed as a marksman. The solicitor was acting for Peter alone; he was not told that Murphy had a solicitor of his own; Murphy had no adviser at all and had not been consulted in any way during the preparation of the settlement. Dr. Comyn himself “knew about the boycotting thoroughly well”; “boycott” was counsel’s term and it is right to say that the evidence, so far as it goes, suggests that the facts do not warrant so strong an expression to describe Peter’s annoyances from his neighbours up to this time. Dr. Comyn says that he explained Murphy’s covenants to him and that Murphy also then executed the deed. Finally he “told Peter, in the presence of Murphy, that, if Murphy did not comply with the covenants, he, Peter, knew where to find me.” He did not give Murphy any copy or duplicate of the deed. It is not suggested that Murphy made any claim to a money settlement.
The settlement purports to make Peter Grealish, as beneficial owner, assign the farm absolutely as from Peter’s death to Thomas Murphy, his heirs and assigns, subject to a life interest in Peter; the land is expressly charged with a right for Murphy to reside in Peter’s house and to be supported and maintained out of the land during Peter’s life; Murphy for his part covenants with Peter, during Peter’s life, without reward to reside in the house and work and manage the land and sow and harvest the crops and attend to and take proper care of all farm stock and implements and the buying and selling of stock and generally to perform all the farm work and the duties of a labourer as required by Peter and (a very important covenant) duly and properly to account for all moneys expended or received by him on behalf of Peter; and Murphy covenants to pay Peter £1 a week for every week in which he fails to reside with Peter and to indemnify Peter for any loss and expense incurred on the maintenance or wages of any person employed by Peter to perform any work that Murphy may fail to do.
Thus Peter executed an improvident settlement, surrendering irrevocably his own absolute title for a life interest in consideration of personal covenants, backed by no adequate sanctions; the farm itself was hypothecated to secure the newcomer, beside whom Peter was a Croesus; and Peter was to be left for the remainder of his life very much at the mercy of a rather impecunious young man, who had no ties of blood and was still unproved as a friend. I think effective safeguards for Peter could have been devised, if there was to be a settlement, or alternatively Peter might have contracted to settle the property on Murphy by will, upon the lines suggested by Coverdale v. Eastwood (1);whatever plan was adopted, I think that suitable conditions could and should have been determined in negotiation between the solicitors for the parties, each of whom ought to have been separately represented. But these reflections are otiose, if the conclusive answer to Peter’s present claim is that he was separately advised by an independent solicitor.
That contention deserves careful examination and I have examined it with great care. I am satisfied that Peter received from an experienced solicitor advice that was absolutely independent and I am satisfied that the draft deed was settled by very able counsel, upon instructions reflecting, of course, the state of mind and knowledge of the solicitor. Nevertheless, the question of Peter’s actual understanding of the solemn document that he executed on October 20th, 1942, is a question of first importance. Dr. Comyn, who avows that he looked upon the settlement as a transaction similar to the three attempts which, as Peter told him, had broken down, says that he was absolutely satisfied that Peter understood the instructions he gave for the deed. I have no doubt that Peter did know that the deed would secure the land to Murphy at Peter’s death and that he knew generally the undertakings that Murphy was giving in return; Peter showed his own understanding of the young man’s obligations, when he formulated his grievance in his own words:”He (Murphy) did not do anything about the agreement; he failed. . . . He was bound to look after me and buy and sell and give up the moneywhat he did not do.” But the trouble is that the solicitor, whose advice was essential to Peter, did not advise en connaissance de causeand that Peter’s actual knowledge of what he was doing fell very short of the knowledge that the settlor ought to have had. That is the result in my mind of candid evidence from Dr. Comyn himself and of inferences thereform. Consequently the principle of Harrison v. Guest (1) and Coomber v.Coomber (2), that a competent assignor, who knows what he is doing, must be held to his deed, does not apply here.
The evidence proves that the solicitor did not know all the material facts, that he did not give Peter a complete explanation of the nature and effect of the deed, and that the duty of illuminating Peter’s benighted mind was more imperative and more formidable, if the task was possible, than the solicitor supposed.
First. Dr. Comyn did not get the facts. He did not ascertain the total of Peter’s property, nor the proportion between that total and the value of the farm at Carnmore; yet that was relevant and material information for an adviser. Still more important to be known was the fact that Peter had already placed £2,000 on deposit in the joint names of himself and Murphy, with Murphy’s ready acquiescence, under the illusion, known to Murphy, that this device would ward off the imaginary terrors of Dublin Castle. Murphy, knowing Peter for what he was, could not assume that Peter had mentioned the episode, still less that he had given an accurate account of it; Murphy ought to have told the solicitor all about it, but he persisted in his curious policy of silence. Perhaps Murphy did not know positively how silly Peter’s ruse was as a measure of defence, but he is intelligent enough, in my estimate of him, to have felt the transaction to be one of questionable virtue and of very dubious value, and, both for this reason and because he stood to gain a large sum of money from his pitiable patron, he ought to have spoken out at this juncture. Here was cogent evidence, had the solicitor and counsel known it, that Peter was and would be incapable of taking care of his own interests and that Peter and Murphy combined were and would be unequal to the burden of taking care of his property. Instead of favouring the projected settlement, as he did, Dr. Comyn must have gone into the whole affair very much more warily, had he known. He did not know, because, by agreement or coincidence, each of the two men vitally concerned said nothing.
Secondly. Peter was not told and did not realise how gravely he was committing himself and jeopardising his own interests; he probably understood neither the immediate pledging of his favour to Murphy nor the effect of that charge; certainly the difference between this deed and a will was not explained to him, nor the fact that the settlement was to be irrevocable and his alienation irretrievable, no matter how badly Murphy might behave, no matter what untoward development might supervene; and he was certainly not a man to apprehend the risks, at least without the clearest and most insistent exposition of them. What precautions were taken in the deed against the vicissitudes of life? Murphy might have mismanaged the farm hopelessly, for all the solicitor could tell; or, for all he could tell, Murphy might have taken to drink or gone to the devil or married a shrew who would make Peter’s life a torture; he might have become a bankrupt; he might have been sent to hospital for years, or been committed for some time to an asylum; he might even have been sentenced to imprisonment. Unlikely events, very unlikely? Perhaps, but why do I insure my house against fire, and how was the solicitor, a stranger to Murphy, to gauge the probabilities of an ensuing incapacity or incompetence? An act of God is always unlikely (before it happens) and the devil’s action may often seem unlikely too. And if some such calamity had smitten Peter, the law might or might not have given him some costly redress. It was unlikely, perhaps very unlikely, that the young man would predecease the old; but how deplorable would Peter’s position have been, if Murphy had died after a few months’ work under the deed and perhaps twenty years before Peter himself! However, Peter’s advisers had no more dark forebodings than their client. Clearly there were some important aspects of the deed far outside poor Peter’s ken, when he scratched his rude mark upon the paper.
Thirdly. The solicitor quite erroneously considered and treated Peter as a normal member of the farming community; in fact I think he treated him as a man of high intelligence. Taking his client to be a competent judge of his own man, the solicitor, who just knew Murphy to be a farmer’s son and no relative and Peter’s dumb attendant, made no inquiries at all as to Murphy’s antecedents, character, capacity or financial position; he assumed both the fitness of Murphy and the value of his covenants; he did not suspect how easily the young man might become master of the situation, nor how much he would be tempted to abuse his trust; and the deed reflects that kindly confidence; whether Dr. Comyn seriously expected Murphy to keep accounts, I do not know. No need was felt to appoint trustees; perhaps they would have been hard to find, but, had the solicitor realised the settlor’s weakness, he would have seen that Peter required and must have the protection for which trusts were invented. Unless there be a legal presumption of undue influence against Murphy, making other questions quite subordinate, I regard it as a matter of high importance that Peter’s advisers in this particular transaction should have been equipped to advise him with a just appreciation of his mental debility and his special need of protection. They were not so equipped and Peter did not get the circumspect advice and protection so necessary to him.
Now, how is Murphy affected by any criticism reflecting upon the advice under which Peter acted? I have shown that Murphy’s own conduct in the matter was not beyond reproach, but any impartial person will see that it is quite impossible to say that the deed was procured through Murphy’s undue influence, even if he did his part during nearly nine months, as he naturally would, to keep the old man’s ardour alive. Nor is this the familiar case in which the Court, from the relation of the parties, must presume undue influence until disproved positively by the recipient of the bounty; Murphy had constituted himself Peter’s interim confidential agent in January, 1942, and had thus placed himself in a very delicate position, an exceptionally delicate position in view of Peter’s mentality; but the undoubted fact is that some such transaction as that eventuating in the actual settlement had been expressly envisaged by the parties from the outset, before Murphy can have acquired any influence whatsoever; therefore I cannot fairly impute to him Peter’s decision to put the business on a legal basis as soon as the way was made clear by the final elimination of the Fox interest, the only obstacle. And Murphy in no way interfered with the drafting of the deed in the particular form which it took.
Peter had intended all through to leave the property to Murphy and to bind himself to that effect, in return for the precious services to be rendered by the vigorous young man to the rather helpless old one. As from January, 1942, Murphy had only to be kind to Peter, as he was, and to retain his goodwill, as he certainly did, in order to secure his reward from that eager benefactor.
Besides, the plan was not originated by Murphy, but by Peter, and by Peter alone. Murphy on his side had faced appreciable risks in accepting Peter’s advances; and any picture of him as an adventurer, inveigling his witless victim into a trap in the October settlement, would be a caricature. Much as I blame Murphy for his reticence (partly perhaps through ignorance) as to the existence of his own solicitor and for his want of candour in suppressing the eccentric and disquieting £2,000 deposit in the joint names, I could not in common sense treat these faults as any evidence of undue influence in relation to the settlement on the facts; and, if Murphy throws doubt on the veracity of his own evidence concerning Peter’s alleged original offer to settle money on him, by his failure to mention that important promise to Dr. Comyn and his failure to call upon the solicitor to make good that promise in the deed, here again my criticism of Murphy as a witness is foreign to the issue of undue influence in fact and remote from any evidence that would raise a legal presumption of undue influence against Murphy, so far as the settlement is concerned.
The result is that the plaintiff’s attempt to set aside the deed on the ground of undue influence, whether actual or presumptive, by Murphy cannot succeed, and, if the deed had to stand or fall upon that issue, there would be nothing more to say. But the position in law as I see it, upon the pleadings, is not so simple as that; there is another crucial matter to be determined.
Peter cannot avoid the deed for undue influence; but his claim is further based on the improvidence of the transaction and also he directly alleges (though in connection with the charge of undue influence) his own mental incapacity; I think I can reasonably read these averments together without calling for an amendment of his pleadings.
The issue thus raised brings into play Lord Hatherley’s cardinal principle (from which the exceptions are rare) that Equity comes to the rescue whenever the parties to a contract have not met upon equal terms, see Lord Hatherley’s judgment (dissenting on facts) in O’Rorke v. Bolingbroke (1);the corollary is that the Court must inquire whether a grantor, shown to be unequal to protecting himself, has had the protection which was his due by reason of his infirmity, and the infirmity may take various forms. The deed here was in law a transaction for value: Colreavy v. Colreavy (2);however tenuous the value may have proved to be in fact, and, of course, a Court must be very much slower to undo
a transaction for value; but the fundamental principle to justify radical interference by the Court is the identical principle, whether value be shown or not, and the recorded examples run from gifts and voluntary settlements (including an abortive marriage settlement) to assignments for a money consideration. The principle has been applied to improvident grants, whether the particular disadvantage entailing the need for protection to the grantor were merely low station and surprise (though the grantor’s rights were fully explained): Evans v. Llewellin (1), or youth and inexperience: Prideaux v. Lonsdale (2); Everitt v. Everitt (3), or age and weak intellect, short of total incapacity, with no fiduciary relation and no “arts of inducement” to condemn the grantee: Longmate v. Ledger (4); Anderson v. Elsworth (5).Even the exuberant or ill-considered dispositions of feckless middle-aged women have had to yield to the same principle: Phillipson v. Kerry (6); Wollaston v. Tribe (7).
The principle prevailed, when the deed was “the most honest thing in the world” so far as the settlor and her solicitor were concerned: Everitt v. Everitt (3), and though the evidence of the solicitor acting for the grantor was fully accepted: Phillipson v. Kerry (6), and again where the deed had been prepared by the grantor’s own solicitor, a man of honour, but the grantor, while fully understanding the benefit to accrue to the grantee, had not fully understood the effect of her deed as it affected her own interests: Anderson v. Elsworth (5); in several other instances the inadequacy of the explanations given to the grantor has been a conspicuous, indeed a decisive, factor in the Court’s action against an improvident deed, the Court either assuming: Prideaux v. Lonsdale (2), or having direct evidence: Phillipson v. Kerry (6); Wollaston v. Tribe (7), to prove a serious lack of understanding. The least the Court can demand is that an infirm grantor shall have known what he was doing. In the much more frequent, but analogous, instances of deeds attacked for undue influence the Judicial Committee has insisted that the donor must have had a complete explanation of the nature and effect of the transaction, from an advisor who himself knew all the relevant circumstances: Inch Noriah v. Shaik Allie Bin Omar (8), even where the advisor was selected by the donor: Williams v. Williams (9),and the same imperative requirement was stressed in a transaction for value by Isaacs J. upon a deed closely resembling the deed in this action in some aspects, but obtained by undue influence: Watkins v. Combes (1).
In my judgment, without any regard to any question of undue influence, upon Lord Hatherley’s principle and the concurrent authorities the plaintiff by reason of his own weakness of mind, coupled with the deficiencies in the legal advice under which he acted and his unawareness, is entitled to have the improvident indenture of settlement, dated October 24th, 1942, set aside and the Register of Freeholders rectified.
I may add that the balancing of equities is not complicated here by any plea of estoppel, nor have I on the evidence any reason to suppose that the defendant has suffered any prejudice worth mentioning through executing the settlement.
I pass to the other heads of complaint and first to the £2,000 deposit. On June 19th, 1942, Peter, with Murphy at his elbow, first called at the Bank of Ireland in Galway, and removed in notes a sum of £2,000 standing on deposit there in his own sole name, and then went to the National Bank in Galway, and put the money on deposit there in a new account made out in the Joint names of himself and Murphy. He had had some difficulty concerning another deposit account in the Bank of Ireland, standing in his own name and that of a deceased brother, because the Bank had demurred to paying Peter from that deposit without being satisfied that the duty payable to the State on his brother’s death had been discharged; the brother had died some years before, and, as the beneficial owner of the money, fiercely resenting the suggestion of its depletion by fiscal claims and the delay, Peter was angry at the Bank’s attitude. I cannot, on the evidence of a single witness, a partisan, hold as a fact that Murphy pressed Peter to make the change to another bank by frightening him with the Revenue bogey, even though Peter in part supports the story. But the following answers by Murphy himself show that the money was withdrawn under a delusion, in fear of the Revenue Commissioners, and discover Murphy with varying explanations for the insertion of his own name in the second Bank’s account:
Q. 1570. (In chief.) “Was he (Peter) going to assail the Bank of Ireland again?” (The reference is to a visit to the Bank on the previous day.)
“Yes. He said, when leaving the office (that is the Bank) the day before that he noticed a Customs and Excise man leaving the office. He said’If I don’t take my money out of that Bank, they will rob me completely.'”
“Was the £2,000 eventually paid over on to the counter to him?” “Yes.”
“Before he got to the National did he say anything about what he was going to do with the money?”
“I asked him first what he was going to do and he said ‘I’m going to put it into the National.'”
“After that, did he tell you what he was going to do with the money?”
“He said, ‘I will put your name in with it.'”
“Was that the first time he ever said anything to you about putting your name on the deposit?” “Yes.”
“What did you say?”
“I said nothing at all for the time being (sic!). Then a bit further down he said, ‘I don’t want my relatives to get any of the money.'”
(In cross-examination.) “And, according to your case, you had got a gift of £2,000?”
“I don’t know about the £2,000. I left it at that.”
“You are claiming it here in this action as a gift?”
“I am. Grealish told me he intended leaving it to me after his death.”
“You are claiming that £2,000 as a gift; did I hear you say that Grealish told you he intended leaving that after his death?” “Yes.”
“When did he say that?”
“He said, ‘I intend leaving all my money to you’; he did not mention £2,000 or £3,000.”
“When did he make that interesting announcement to you?”
“On the way down to the Bank.”
“What day was that?”
“19th June.”
“The day you went down to the Bank?” “Yes.”
“He made that interesting announcement, which you forgot in your direct evidence, that he was going to leave you all his money, not mentioning this particular sum?”
“Yes.”
“He intended leaving you everything he had after his death?” “Yes.”
Mr. Thunder, the Manager of the National Bank, who knew that the money belonged to Grealish, says that he saw the plaintiff privately, because he was a marksman; he told him that both signatures would be required to draw any money, and explained to him, and was satisfied that Grealish understood, that a lodgment in joint names meant that the survivor would be entitled to the money, if one of them died; Peter just replied that “Murphy was managing his business and looking after him in general”: he said nothing about wanting to make a present to Murphy.
“Were you able to form any impression of his intention about the money, whether he intended making a present of it to Murphy?”
“No, I could not tell you that.”
Mr. Thunder says that Peter was quite clear with him. The deposit receipt was given to Peter.
The unsatisfactory features of this episode are patent. The transaction was shocking and the two men did not stand on equal terms, so that I think I might, following Lord Hatherley’s principle, or perhaps the even more emphatic language of Sullivan M. R. in Slator v. Nolan (1), against any party taking undue advantage of another, uphold the plaintiff’s claim, without any regard to the peculiar relations of the parties. But Murphy, on his own evidence had become Peter’s interim manager and business agent, his confidential man, as early as January, 1942; their relations were such that the Court must on long settled principles assume undue influence, if not rebutted, and for this issue the burden of proof is definitely upon Murphy, who has wholly failed to discharge it. Murphy had put himself into such a position towards this old man as to be bound to protect his patron in money matters, even against the patron himself; and Murphy was bound to refuse any gross prodigality in his own favour, made in secret or without competent advice. Moreover, quite apart from any confidential relations, the presumption of a resulting trust stands unrebutted, for I must discount Murphy’s own evidence here. I need not labour this matter. I disregard the fact that interest on the deposit was paid to the joint holders and shared between them. Peter’s vagary in the matter of the £2,000 must be redressed. The transaction cannot stand.
I come to the present of Peter’s cattle to Murphy after the deed of settlement and Murphy’s realisation of the cattle for his own use. I need say nothing more of Murphy’s method of acquisition, for his position under the deed puts him out of Court. Here was a flagrant abuse by Murphy and he must make good Peter’s loss, which I measure, on Murphy’s evidence, at the sum of £643.
Finally, the plaintiff is entitled to an account. He is entitled to an account of all dealings by the defendant with, or in relation to, cattle for, or on behalf of, the plaintiff during the calendar year 1942, and a further account of all moneys, the property of the plaintiff, come to the hands of the defendant.
The first account (which I hope the plaintiff will be advised to waive) relates in particular to the sale of cattle for some £530 by Murphy at the Tuam Fair in October, 1942; Murphy says that he bought cattle at Westport Fair immediately afterwards for the plaintiff to the value of £500, and he was at pains to give some account of the balance. But Murphy has in his power or procurement one or more banking documents in this connection, which he omitted from his affidavit of documents. That is why I have to order the first account, if it is sought, but I do not think that Peter has anything to gain from it. Murphy’s purchase of cattle for Peter at Gort in May, 1942, to the value of £480 is not disputed and must be allowed in the account.
The second account is necessitated by Murphy’s admission in cross-examination that he received on October 30th, 1942, from Peter a sum of £700, whereof (though he may be able to justify more) he has so far accounted to my satisfaction for only £115 paid by Peter’s direction to Costello; for the moment I shall extend the charity of silence to the remainder of his evidence on this subject, including the reappearance of the fiscal vampire. This account will deal also with the £500 paid by Peter to Murphy in January, 1943. Murphy may object that the statement of claim does not complain of this particular payment, and it does not; that is why I deal with the matter by way of an account instead of giving judgment for the amount; but I think the answer to the objection is that Peter’s advisers probably did their best upon incoherent instructions; they did complain of a gift of £500 by Peter to Murphy and properly attributed it to undue influence upon Murphy’s threat to abandon Peter, but they placed the gift in October, 1942, confusing it with the price (£530 on Murphy’s evidence) realised at that time by the aforesaid sale of Peter’s cattle at Tuam Fair. I think the mistake was understandable in lawyers who had Peter for a client, and Peter did in fact depose to this payment in his evidence. I see no need for the statement of claim to be amended, because the prayer for an account seems to me sufficiently to cover this claim and Murphy has not been misled.
I have said nothing about the two cars for Murphy, bought with Peter’s moneys; I do not regard these gifts as tainted; I am satisfied that the private car was promised by Peter at his first interview with Murphy; probably he promised the lorry too, though here Murphy’s evidence is not corroborated. The statement of claim makes no specific claim under this head and the moneys paid by Peter for the two cars may reasonably be treated as having been properly expended by Murphy. In all the circumstances the accounts will be directed without interest.
Shiel v McKeon
[2006] IEHC 194
JUDGMENT of Mr. Justice Clarke delivered 31st May, 2006.
1. Introduction
1.1 Both the plaintiff (“Mr. Shiel”) and the defendant (“Mr. McKeon”) had an interest in purchasing a property at Carrowhubbock, Enniscrone, Co. Sligo (“the property”). The property concerned had been in the ownership of the Sproule family for some time. The property consisted of a house with surrounding garden backing onto a further plot of land which in turn backed onto the sea. Mr. Shiel is a solicitor who owned a holiday home just across the road from the property. Mr. McKeon’s family were from Enniscrone and owned lands directly adjacent to the property. Mr. McKeon had purchased those lands from his father and secured a planning permission for a significant retail and residential development for the development of his lands. His interest in the property dated back some years when the property was owned by a Mr. Ken Sproule with whom he had some contact in relation to a possible purchase. Sadly Mr. Sproule died in April 2005. There can be little doubt but that, subject to obtaining a suitable planning permission, the portion of the property nearest the sea could have been easily incorporated into the development for which Mr. McKeon had already obtained planning permission.
1.2 It will be necessary to set out in more detail the precise attempts which both parties made to purchase the property. Suffice it to say that there was a time when it is clear that both were actively pursuing the property. During that time a meeting between the parties took place on the 14th August, 2005, as a result of which Mr. Shiel contends that an arrangement was entered into whereby Mr. McKeon would purchase the property, would retain the rear portion for himself but would hold the front portion (which consisted of the Sproule house and the gardens immediately around it), on trust for Mr. Shiel. Any such arrangement is strenuously denied by Mr. McKeon.
1.3 However it is in the context of such an alleged arrangement that these proceedings are brought.
1.4 It will be necessary to turn in due course to the nature of the trust claimed and the legal principles applicable. However before doing that I should set out the uncontroversial facts which led to the meeting of the 14th August.
2. The Facts
2.1 While it would appear that both parties knew of each other, there does not seem to have been any direct contact between them until Thursday 11th August, 2005. The history of events concerning the possible purchase of the property up to that date needs to be outlined.
2.2 It would seem that Mr. McKeon had approached Mr. Ken Sproule some considerable time earlier with a view to a possible purchase of the property. However at that stage Mr. Sproule had, unfortunately, been diagnosed with a serious illness from which he, sadly, died. In the circumstances no further progress in relation to the matter occurred until July 2005 when the property was advertised for sale through Sherry Fitzgerald.
2.3 It should also be noted that there was a potential issue between Mr. McKeon and the Sproules as to the precise boundary between the neighbouring property which Mr. McKeon owned (and in respect of which he had obtained planning permission) and the property. While the amount of land concerned was not, in itself, very significant, the line of the boundary between the properties had the potential to be of some significance to Mr. McKeon because of access to public drainage facilities. If the boundary was where Mr. McKeon asserted it to be, then he would have had ready access to the public drainage. If the boundary was where it appeared on the ground then it might have been somewhat more difficult for Mr. McKeon to secure such access. There was some debate in the course of the hearing as to the extent to which there might have been other alternatives for Mr. McKeon. It was not possible, on the basis of the evidence before me, to reach any clear view as to the viability of alternative sources of access. I can do no more than conclude that securing that the boundary was where he (Mr. McKeon) suggested it ought to be was an issue of at least some importance to him. In that context Mr. McKeon arranged for his solicitor (Mr. Gordon) to write to Ms. Nuala Feeney of Sherry Fitzgerald in respect of the boundary.
2.4 It would also appear that prior to the 11th August Mr. McKeon had made a number of offers in respect of the property to Ms. Feeney and had, it would seem, agreed in principle to purchase the property for €435,000 on Monday or Tuesday the 8th or 9th August. No booking deposit had been paid by the time the events which are in controversy between the parties occurred. Still less had any formal contract been entered into.
2.5 I should note that neither side called Ms. Feeney to give evidence. Therefore much of the evidence given respectively on behalf of Mr. Shiel and Mr. McKeon concerning their dealings with the property (other than in relation to each other) was largely dependent on their own accounts and were not controverted. In the absence of any evidence to the contrary I can see no basis for not accepting those accounts. I merely note the fact that Ms. Feeney did not give evidence in fairness to her, for the purposes of pointing out that it is possible that she might have a different account in respect of some of the matters.
2.6 So far as Mr. Shiel is concerned it would appear that he had asked a Mr. Noel Jacob to bid on the property for him. Mr. Jacob had known Mr. Shiel for at least 10 years prior to these events and had phoned Mr. Shiel for the purposes of informing him that the property was for sale. It would appear that a number of bids were put on the property by Mr. Jacob on behalf of Mr. Shiel. It was Mr. Jacob’s evidence, which I accept, that at the time when he made what was, for him, the highest bid of €415,000, it was his understanding that it was the top bid as of that time. He did not disclose to Ms. Feeney that he was bidding on behalf of Mr. Shiel. After making the bid of €415,000 and communicating that fact to Mr. Shiel, Mr. Jacob was no longer directly involved. It would appear that on 11th August Mr. Shiel came to understand that the property was to be sold to another party. In those circumstances he contacted a member of the Sproule family (Mr. Glen Sproule) directly rather than contacting Ms. Feeney the Estate Agent. As a result of that initial contact, it would appear that Mr. Shiel had a subsequent conversation with Ms. Feeney where he was informed that he would have to offer €500,000 for the property if he was to secure it. It would also appear that at that stage he offered €450,000.
2.7 The position which existed immediately prior to the initial contact between the parties was, therefore, that from Mr. McKeon’s perspective he had an agreement to purchase the property (admittedly subject to contract and, indeed, subject to him paying a booking deposit in order to secure that the Estate Agents would treat the property as no longer on the market) and found that Mr. Shiel was attempting to interfere with that sale. However from Mr. Shiel’s perspective, he had made what he considered to be the highest offer on the table at the time of the making of his offer of €415,000 and found that the property had, apparently, been sold without giving him a chance to up his bid. Due to the absence of any witnesses from either the Sproule family or the Estate Agents acting on their behalf, it is impossible to know with any precision how that undoubtedly difficult situation arose. However it is easy to see how, from the perspective of both parties, there was a feeling that things had not been properly dealt with. That fact should be noted before passing on to the controversial series of dealings between the parties which occurred between Thursday 11th August and Sunday 14th August to which I will turn in due course. It may also go some way towards explaining the level and force of the accusations directed at the hearing against both parties. However before going on to analyse the course of dealing between the parties it is necessary to turn, first, to the legal principles by reference to which those facts need to be assessed.
3. The Law
3.1 In Pallant v. Morgan (1953) 1 Ch. 43 Harman J. had to consider the legal implications of an agreement reached between the agents of two neighbouring land owners in an auction room immediately before an auction. One agent agreed that he would refrain from bidding on the basis that there would be a division of the land according to a formula which left certain details to be agreed later. The parties subsequently failed to agree on those details and the aggrieved party claimed specific performance or alternatively a declaration of trust. In respect of the claim for specific performance the court held that the arrangements between the agents were not sufficiently precise (having left matters of some substance over for further agreement) to permit specific performance. There was, the court held, “too much left undecided”. However, at p. 48 Harman J. went on to say the following
“Is the result then that the plaintiff must fail? In my judgment not so. To allow the defendant to retain lot 16 under these circumstances would be tantamount to sanctioning of fraud on his part and I find the following in Fry on Specific Performance 6th Ed. at p. 184, para. 386, at the end of the chapter in which the author is dealing with what he styles the “uncertainty of the contract”: “the same certainty”, he says, “will not be required in cases where there is an element of fraud, as in simple cases of specific performance of a contract. Thus where A. agreed with B. in effect that if B. would not try to buy a certain estate, A would try to buy, and in case of success would seed a portion of the estate to B. at a certain price: and B. acted on his bargain and allowed A. to purchase: and A. having purchased refused to perform his part and set up the uncertainty of the part to be seeded: the court held that the defence could not avail and directed an inquiry to ascertain the portion to be given up and the price. It seems that if this could not have been ascertained, B. might have claimed the whole estate”.
3.2 The court then went on to note that the relevant paragraph from Fry is based on Chattock v. Muller 8 Ch. T 177 and proceeded to apply the principle to the facts of the case before it.
3.3 The Court of Appeal in the United Kingdom returned to the issue in Banner Homes plc v. Luff Developments Limited and Another (2000) Ch 372. In applying Pallant Chadwick L.J. (speaking for the court) and having reviewed extensively all relevant authorities stated the following at p. 397:
“Equity must never be deterred by the absence of precise analogy, provided that the principle invoked is sound. Mindful of this caution, it is, nevertheless, possible to advance the following propositions.
(1) A Pallant v. Morgan equity may arise where the arrangement or understanding on which it is based precedes the acquisition of the relevant property by one party to that arrangement. It is the pre-acquisition arrangement which colours the subsequent acquisition by the defendant and leads to his being treated as a trustee if he seeks to act inconsistently with it. Where the arrangement or understanding is reached in relation to property already owned by one of the parties, he may (if the arrangement is of sufficient certainty to be enforced specifically) thereby constitute himself trustee on the basis that “equity looks on that as done which ought to be done”, or an equity may arise under the principles developed in the proprietary estoppel cases. As I have sought to point out, the concepts of constructive trust and proprietary estoppel have much in common in this area. Holiday Inns Inc. v. Broadhead, 232 E.G. 951, may perhaps, best be regarded as a proprietary estoppel case; although it might be said that the arrangement or understanding, made at the time when only the five acre site was owned by the defendant, did, in fact, precede the defendant’s acquisition of the option over the 15-acre site.
(2) It is unnecessary that the arrangement or understanding should be contractually enforceable. Indeed, if there is an agreement which is enforceable as a contract, there is unlikely to be any need to invoke the Pallant v. Morgan equity; equity can act through the remedy of specific performance and will recognise the existence of a corresponding trust. On its fact Chattock v. Muller, 8 Ch.D. 177, is perhaps, best regarded as a specific performance case. In particular, it is no bar to a Pallant v. Morgan equity that the pre-acquisition arrangement is too uncertain to be enforced as a contract – see Pallant v. Morgan [1953] Ch. 43 itself, and Time Products Ltd. v. Combined English Stores Ltd., 2 December 1974 – nor that it is plainly not intended to have contractual effect – see Island Holdings Ltd. v. Birchington Engineering Co Ltd., 7 July 1981.
(3) It is necessary that the pre-acquisition arrangement or understanding should contemplate that one party (“the acquiring party”) will take steps to acquire the relevant property; and that, if he does so, the other party (“the non-acquiring party”) will obtain some interest in that property. Further, it is necessary that (whatever private reservations the acquiring party may have) he has not informed the non-acquiring party before the acquisition (or, perhaps more accurately, before it is too late for the parties to be restored to a position of no advantage/no detriment) that he no longer intends to honour the arrangement or understanding.
(4) It is necessary that, in reliance on the arrangement or understanding, the non-acquiring party should do (or omit to do) something which confers an advantage on the acquiring party in relation to the acquisition of the property; or is detrimental to the ability of the non-acquiring party to acquire the property on equal terms. It is the existence of the advantage to the one, or detriment to the other, gained or suffered as a consequence of the arrangement or understanding, which leads to the conclusion that it would be inequitable or unconscionable to allow the acquiring party to retain the property for himself, in a manner inconsistent with the arrangement or understanding which enabled him to acquire it. Pallant v. Morgan [1953] Ch. 43 itself provides an illustration of this principle. There was nothing inequitable in allowing the defendant to retain for himself the lot (lot 15) in respect to which the plaintiff’s agent had no instructions to bid. In many cases the advantage/detriment will be found in the agreement of the non-acquiring party to keep out of the market. That will usually be both to the advantage of the acquiring party – in that he can bid without competition from the non-acquiring party – and to the detriment of the non-acquiring party –in that he loses the opportunity to acquire the property for himself. But there may be advantage to the one without corresponding detriment to the other. Again, Pallant v. Morgan provides an illustration. The plaintiff’s agreement (through his agent) to keep out of the bidding gave an advantage to the defendant – in that he was able to obtain the property for a lower price than would otherwise have been possible; but the failure of the plaintiff’s agent to bid did not, in fact, cause detriment to the plaintiff – because on the facts, the agent’s instructions would not have permitted him to outbid the defendant. Nevertheless, the equity was invoked.
(5) That leads, I think, to the further conclusions: (i) that although, in many cases, the advantage/detriment will be found in the agreement of the non-acquiring party to keep out of the market, that is not a necessary feature; and (ii) that although there will usually be advantage to the one and correlative disadvantage to the other, the existence of both advantage and detriment is not essential – either will do. What is essential is that the circumstances make it inequitable for the acquiring party to retain the property for himself in a manner consistent with the arrangement or understanding on which the non-acquiring party has acted. Those circumstances may arise where the non-acquiring party was never “in the market” for the whole of the property to be acquired; but (on the faith of an arrangement or understanding that he shall have a part of that property) provides support in relation to the acquisition of the whole which is of advantage to the acquiring party. They may arise where the assistance provided to the acquiring party (in pursuance of the arrangement or understanding) involves no detriment (in pursuance of the arrangement or understanding) involves no detriment to the non-acquiring party; or where the non-acquiring party acts to his detriment (in pursuance of the arrangement or understanding) without the acquiring party obtaining any advantage therefrom”.
3.4 It seems to me that the above passage represents the current state of development of the law in this area in the United Kingdom.
3.5 There does not seem to be any direct Irish authority on the matter. In The MacGillicudy of the Reeks v. Joy and Another [1959] I.R. 189 this court was concerned with an agreement entered into by the parties to the effect that they would join in the purchase of a farm. The case would appear to have turned on whether the agreement entered into was enforceable for a variety of reasons including an allegation of uncertainty, an alleged absence of consideration or intention to create legal relations an absence of a provision dealing with land commission consent for subdivision and an alleged absence of a sufficient note or memorandum to satisfy the statute of frauds. The plaintiff having satisfied the court that none of the above prevented an enforceable arrangement having been entered into, the court declared that the defendant held the appropriate portion of the lands on trust for the plaintiff. However it is clear that the case was argued on the basis of contract rather than a trust per se.
3.6 I see no reason not to follow the logic of the decisions in Pallant v. Morgan and Banner Homes and hold that, independent of an entitlement to enforce a contract, there exists an equitable entitlement in the circumstances detailed in those authorities to the enforcement of an arrangement which may fall short, in some respects, from the requirements for the enforcement of a contract. As was pointed out in Banner Homes there would be no need for a Pallant v. Morgan equity in circumstances where there was an enforceable contract because the aggrieved party could simply seek specific performance.
3.7 It is important to emphasise that the Pallant v. Morgan equity arises in circumstances where two persons may be engaged in a joint venture to purchase a property from a third party. It has no application to the more straightforward case where one party is engaged with the other in negotiations for a direct sale of the property. In the latter case a contract will only be enforceable if all of the elements necessary for the creation of contractual relations have been established and if there is a sufficient note or memorandum to satisfy the Statute of Frauds or a sufficient act of part performance or where, as noted in Banner Homes, a proprietary estoppel arises. However the principle behind the doctrine of part performance is that the Statute of Frauds cannot be used as an instrument of fraud. Similarly the Pallant v. Morgan equity derives from the principle that it would inequitable for a person who obtains a benefit (such as the withdrawal of a competitor from a bidding process) to retain the benefit without conceding the substance of the arrangement. I am therefore satisfied to follow Pallant v. Morgan and Banner Homes.
3.8 Having considered all of the relevant authorities I am therefore satisfied that the issue which I must consider on the facts of this case is as to whether there was an arrangement or understanding between the parties as to the purchase of the property such that the circumstances make it inequitable for Mr. McKeon to retain the property in its entirety for himself. It is not necessary that the arrangement or understanding has to be contractually enforceable. Against that background it is now necessary to turn to the contact between the parties which occurred on and after the 11th August, 2005.
4. The Facts in Controversy
4.1 The first actual contact between the parties would appear to have occurred when Mr. McKeon received a phone call, at his house, on Thursday 11th August, from Mr. Shiel. While there are some minor disputes as to what was said on that occasion it seems clear that Mr. Shiel indicated his active interest in the property, but Mr. McKeon was annoyed by this fact, and that the telephone call ended abruptly.
4.2 Mr. Shiel had earlier left a voice message for Mr. McKeon. Subsequently Mr. McKeon made a further phone call to Mr. Shiel which was taken by Mr. Shiel on his mobile phone as he was driving back to Dublin from Enniscrone in the company of his son. There are again some disputes as to precisely what was said during the course of that conversation. However it does not seem to me that anything specifically turns on that conversation in itself save to the extent that it may cast some light on the crucial discussions which took place the following Sunday.
4.3 In that context it is important to note that a great number of issues were explored in the course of the hearing not because they were questions of fact which in themselves had the potential to impact on the final decision in the case but rather were matters which either went to the credit of either of the parties or might be said to make it more likely that one or other contention as to what actually transpired on the Sunday was actually correct. It does not seem to me to be necessary to address each and everyone of those matters in the course of this judgment.
4.4 In any event it seems clear that the second telephone conversation started with Mr. Shiel indicating that he was not prepared to continue with the conversation unless Mr. McKeon apologised for the abrupt termination of their earlier phone call. Such an apology was ultimately tendered. Thereafter it would seem that Mr. McKeon indicated that his primary interest was in the rear portion of the property while Mr. Shiel indicated that his primary interest was in the house and surrounding garden. It appears to be common case that the parties agreed to meet when Mr. Shiel was back down in Enniscrone on the following weekend. As it happens it would appear that the meeting was originally intended to take place on the Saturday but did not, in fact, take place until the Sunday.
4.5 In the intervening period one matter of note occurred. It is clear that Mr. Shiel arranged for his partner, David Fowler, to ring Ms. Feeney on the following day (Friday) for the purposes of telling her that Mr. Shiel would not be available until Monday. It would appear that Ms. Feeney told Mr. Fowler that if Mr. Shiel did not confirm, by close of business on that day (Friday), that Mr. Shiel was prepared to pay €500,000, the property would be sold to Mr. McKeon. It should be said that Mr. Shiel had first given the impression in evidence that nothing of any substance had occurred between the telephone calls on the Thursday and the meeting on the Sunday, but then conceded, under cross examination, that the conversation carried out on his behalf by Mr. Fowler with Ms. Feeney had occurred and, perhaps more importantly, that the substance of that conversation was to the effect that unless Mr. Shiel were to make a bid of €500,000 by close of business on Friday the property would be sold to Mr. McKeon.
In the same context the content of an affidavit sworn by Mr. Shiel on the 21st October, 2005 in an application made earlier in these proceedings needs to be noted. At para. 12 of that affidavit Mr. Shiel conveys the strong impression that he had no contact with Ms. Feeney between Thursday and the Sunday meeting. While this is technically true, in the light of his concession about the contact made on his behalf and the substance of the communication with him (to which I have referred) the paragraph is, regrettably, a long way short of the whole truth.
Of even greater concern are the contents of para. 15 of the affidavit which attempts to convey the impression that Mr. Shiel had outbid Mr. McKeon by offering €450,000 without mentioning that that bid had been rejected and that he had failed to bid €500,000 by close of business on the Friday as he was told by Ms. Feeney he was required to do to avoid a sale to Mr. McKeon.
It is, unfortunately, difficult to avoid the conclusion that Mr. Shiel attempted to conceal the adverse developments with Ms. Feeney on the Friday.
4.6 It is clear that Mr. Shiel was aware of that conversation (and that he had not, in fact, met the deadline of close of business on Friday), when he met with Mr. McKeon on the Sunday. It is equally clear that Mr. McKeon was not aware of the fact that Mr. Shiel had not met a deadline imposed by Ms. Feeney.
4.7 Much of what occurred at the meeting on the Sunday is common case. The parties had an initial meeting at Mr. Shiel’s house, went to visit the site which was, of course, just across the road, and returned for further discussions in Mr. Shiel’s house. On Mr. McKeon’s account he was only there to listen and almost all of the running was made by Mr. Shiel. It is common case that Mr. Shiel suggested that Mr. McKeon would purchase the whole property but in trust for Mr. Shiel as to the house and garden portion. It is further common case that when the parties went to visit the site some discussion as to the appropriate boundary between the property as it might be divided took place. In relation to this aspect of the matter, Mr. McKeon accepts that he suggested that the boundary would need to be placed somewhat nearer the house than it actually appeared on the ground (in line with the neighbouring rear boundary). It is also accepted that Mr. Shiel agreed that Mr. McKeon would be entitled to connect (for the purposes of his planned development) into the sewer passing through the garden at the back of the property (the proposed boundary would have left the sewer on the portion to be allocated to Mr. Shiel). Finally, so far as the substance of the arrangements being contemplated is concerned, it would be appear to be accepted by Mr. McKeon that Mr. Shiel suggested that he (Mr. Shiel) would pay €275,000 of the total purchase price together with a proportionate share of the expenses (including stamp duty) connected with the purchase.
4.8 Of some particular relevance to the issues which I have to decide is that it seems to be common case that Mr. Shiel put forward details as to the mechanism by which the transaction contemplated might be effected. In particular he made suggestions as to the execution of a declaration of trust on the completion of the sale from the Sproules to Mr. McKeon which would have the effect of saving an exposure to double stamp duty. It was also suggested that there would be appropriate wayleaves to provide for connections from Mr. McKeon’s development into the sewer.
4.9 There does not appear to be any dispute but that all of the above matters were referred to at the meeting between the parties. What is in contention is as to whether anything was agreed. Mr. Shiel’s case is that he made it clear that in the event that agreement was not reached it was his intention to engage in a further attempt to purchase the property on the following Monday. On his case all of the above matters were agreed subject only to one question. Mr. Shiel accepts that Mr. McKeon wanted to take expert advice on the question of connections into the sewer.
4.10 On Mr. McKeon’s case his only intervention in the discussions of any substance was to suggest that the line of the boundary between the portion which he was to retain (if agreement was reached) and the portion which was to go to Mr. Shiel was to be along the line of the back garden of the house on the left hand side of the property. In all other respects it is Mr. McKeon’s case that he simply listened to Mr. Shiel’s proposals. Indeed he goes further and says that in particular when Mr. Shiel began discussing the legal technicalities of how any arrangement might be implemented he indicated in strong terms that he did not understand such matters and that Mr. Shiel should discuss same with his (that is Mr. McKeon’s) solicitor.
4.11 In the context of the dispute between the parties two further aspects of what transpired are relevant. It is common case that Mr. Shiel went to get a pen and paper for the purposes of recording the arrangements but that Mr. McKeon declined to have matters so recorded. The only matter which was in fact written down was the particulars of Mr. Shiel’s solicitor. Mr. McKeon says that the reason why nothing was written down was because there was no agreement. Mr. Shiel is adamant that the absence of a written record does not in anyway imply that no agreement had been reached.
In the same vein Mr. Shiel contends that the parties shook hands on a number of occasions as Mr. McKeon was leaving. Mr. McKeon denies this.
4.12 While the case turns on whether any sufficient arrangement had been arrived at, at the meeting which I have just described, so as to make it inequitable for Mr. McKeon not to treat the relevant portion of the property as being held on trust for Mr. Shiel, some of the events which occurred subsequently are material to an assessment of which account of that meeting is, on the balance of probabilities, to be preferred.
4.13 Firstly it should be noted that on the following day, Mr. McKeon paid the booking deposit and thereafter a letter in a usual form issued from Sherry Fitzgerald (dated Monday 15th August, 2005) to the vendor’s solicitors indicating that the property had been sold subject to contract and specifying the terms.
4.14 On the same day, the 15th August, Mr. Shiel contacted Mr. Andrew Turner of Hamilton Turner Solicitors who was the person indicated by Mr. McKeon on the previous day as acting for him. That phone conversation was followed up exactly a week later by a letter of 22nd August, 2005 from David Fowler (whom, as I indicated, is a partner of Mr. Shiel) referring to the conversation had between Mr. Shiel and Mr. Turner the previous week, and setting out the understanding which Mr. Shiel (and through him Mr. Turner) had of the arrangement in the following terms:-
“I understand the arrangement is as follows:
1. Peter is conclude his negotiations with the vendor for the acquisition of the entire property on the basis that John had agreed that he will withdraw from his negotiations with the vendors for the acquisition of the property by him.
2. Peter’s acquisition of the entire property is in trust for John as to the house and the back garden. The back garden is to be along the line of the back gardens of the house on the left hand side of the house.
3. Peter is to transfer at no cost to John any portion of the garden area at the back of the house which may be on Peter’s title.
4. I understand there is a mains sewer passing through the garden at the back of the house and that Peter will require 1/2 connections into this pipe for the purpose of undertaking the apartment development on his adjoining site and possibly also for the purpose of undertaking a development on the site at the back of the house in sale. It is agreed that Peter shall be entitled to make two separate connections to the public sewer as it traverses the garden.
5. Peter has agreed that the upon completion of the connections to the public sewer he shall make good the garden and re-seed to John’s reasonable satisfaction. Upon the completion of the making of the connections to the sewer Peter will construct at his own expense a 2 metre wall to be capped and plastered on John’s side.
6. John will pay €275,000.00 of the total purchase price for the house and the site and Peter will pay the balance. John will discharge his proportion of the deposit upon the signing of the Contract and the balance upon completion.
7. At the time of the signing of the Contract Peter will enter into a Declaration of Trust in John’s favour in respect of the house and the garden.
8. Upon the completion of the acquisition of the property Peter will execute a Deed of Transfer of the house and the garden to John so that John may have the Deed of Transfer adjudicated exempt from stamp duty based upon the Declaration of Trust.
9. John has agreed that there will be executed and delivered to Peter the appropriate wayleaves and easements so that Peter has for the benefit of the adjoining site for the apartments and the site at the rear of the house rights to connect into the public sewer and thereafter to repair and maintain (sic). These easements will be registered as burdens on the title that John will hold to the property.”
4.15 It will be seen from that letter that the arrangements correspond with the matters which, it is common case, were raised by Mr. Shiel at the meeting some eight days earlier. It is clear that in both his initial phone conversation with Mr. Turner and the letter written on his behalf which I have just quoted, Mr. Shiel clearly asserts that an agreement or arrangement along those lines had been entered into.
4.16 The letter of the 22nd August was replied to by a letter of 30th August from Mr. Turner to Mr. Fowler, the operative part of which reads as follows:-
“From the discussion I had with your client and from the instruction received from my client it is apparent to me that no agreement is in existence in relation to the above mentioned property. Having regard to the content of your letter I am instructed that our client does not at this stage wish to proceed along the lines as indicated by you”.
Thereafter the proceedings commenced.
4.17 It is important to note that prior to the receipt of the letter of 22nd August Mr. McKeon went to meet with Mr. Turner, on Wednesday the 17th August. An attendance of that consultation was produced on discovery and Mr. Turner was called by the plaintiffs to give evidence in respect of it. No privilege was claimed in relation to the matter. The attendance gives an account which, insofar as concerns the lead up to the Sunday meeting, is consistent with the evidence of Mr. McKeon. In relation to that meeting itself the memorandum reads as follows:-
“He met him on Sunday. He instructed John that he did not wish any notes to be taken and didn’t want any agreements to be produced in writing. He said that he needed to discuss the matter with his solicitor and architect that they would discuss the property and the proposals for the property. They informally agreed to divide the property into two lots. Peter will take the land at the bank (sic). And John would take the house at the front. Peter would pay €160,000 and John Shiel would pay €275,000 for the house. There was a small section that would be transferred from Peter to John Shiel and John Shiel would in return grant rights for the easement and access to the sewage. The foregoing represents the basic leads (sic) of an agreement but subject to Peter taking legal advice and advice from his architect”.
4.18 One further matter noted in the memorandum of the consultation should be referred to. The memo ends with the following passage:-
“In relation to John Shiel I have been instructed to delay matters until the contract comes in but if he pushes me on the issue I have been advised that I should notify him that we intend to purchase the property in our own name and to indicate to him that we have no real designs on the house and it is our client’s view that he will on balance probably sell the property to him at a later stage”.
4.19 It should be pointed out that in evidence Mr. Turner indicated that the phrase “informally agreed” was his interpretation of the matter and did not represent a specific comment made by Mr. McKeon.
4.20 The second matter that transpired was that prior to the letter of rejection of 30th August, a signed contract for sale of the property became available to Mr. McKeon by, at the latest, the 29th. Thus by the time the formal letter of rejection was sent Mr. McKeon had in fact a binding contract.
4.21 In assessing the evidence I should firstly say that while Mr. McKeon questioned some aspects of the memorandum of his conversation with Mr. Turner, it seems to me that there is no basis for rejecting Mr. Turner’s account of the consultation. On that basis it seems to me that I must hold that whatever language was used by Mr. McKeon in describing the meeting on Sunday the 14th, same was such as conveyed to Mr. Turner an impression that there was at least an informal agreement. It is clear that Mr. Turner, correctly, advised Mr. McKeon that there was no binding contractual arrangement between Mr. McKeon and Mr. Shiel. However that is not the issue in this case. The issue is as to whether there was an arrangement between the parties such as would render it inequitable for Mr. McKeon not to treat the property as being held, as to the appropriate part, in trust for Mr. Shiel. In the circumstances it seems to me that I must, on balance, hold that whatever language was used by Mr. McKeon at the meeting of the 14th it was such as was likely to have reasonably led Mr. Shiel to the belief that there was at least an informal agreement between them. If Mr. McKeon gave that impression to his own solicitor at a meeting some time three days later then it seems to me to be equally likely that he conveyed the same impression to Mr. Shiel. It is also of note that the recorded description of the “informal agreement” corresponds, to a very large extent, with the contents of the letter subsequently received on behalf of Mr. Shiel.
4.22 I am therefore satisfied, as a matter of fact, that Mr. McKeon indicated a sufficient level of agreement to the arrangements proposed by Mr. Shiel at the meeting on 14th August to lead Mr. Shiel to believe, reasonably, that they had entered into an arrangement sufficient to permit Mr. Shiel to withdraw from a consideration of whether he would attempt to reactivate his bid for the property on the following Monday. While Mr. Shiel had not, I am satisfied, made up his mind as to whether to bid again on the Monday, I am satisfied that the arrangement reached on Sunday influenced his decision not to contact Ms. Feeney and attempt to re-activate his interest in the property.
I am also satisfied that Mr. McKeon was concerned about the legal and engineering consequences of what was proposed and indicated that he needed professional advice on those matters. However those issues were concerned with the method of implementation of the arrangements rather than their substance. While I am, therefore, satisfied that the matters agreed to be discussed professionally were wider than those contended for by Mr. Shiel (and extended to questions concerning the legal methods of implementation) I am nonetheless satisfied that Mr. McKeon conducted himself at the meeting in such a way as conveyed the impression that, subject to those issues of implementation being capable of satisfactory resolution, an arrangement would be entered into.
4.23 I am also satisfied that Mr. McKeon was aware that his position was not secure until he had a formal legally enforceable contract signed by the vendor. It seems clear that he wished to keep, if at all possible, Mr. Shiel from becoming aware of the fact that he did not wish to go through with the arrangement until after he had secured a signed written agreement. While in fairness it should be noted that there was no suggestion that, if pressed, Mr. Shiel would not be told the true position, nonetheless it is clear that the desired position was that Mr. Shiel would not discover the true position until it would have been too late for Mr. Shiel to seek to do anything about it. That such a matter is a factor in determining whether a Pallant v. Morgan equity may be said to exist can be seen from item (3) in the passage from Banner Homes referred to at para. 3.3 above. Also that fact is only consistent with knowledge on the part of Mr. McKeon that it was likely that Mr. Shiel would refrain from any further attempt to bid on the property until such time as Mr. Shiel was told that all bets were off. It can only be to that end that it was decided to attempt to delay Mr. Shiel receiving that knowledge until after a signed contract was available to Mr. McKeon.
4.24 In all the circumstances it seems to me that I must conclude that at least an informal arrangement was entered into between the parties which led Mr. Shiel to the reasonable belief that Mr. McKeon would in fact purchase the property in part trust on his behalf and which led Mr. McKeon to the belief that Mr. Shiel would refrain from actively pursuing the property.
5. Some Other Issues
5.1 In his closing submissions on behalf of Mr. McKeon, counsel sought to draw a distinction between the authorities following Pallant and the facts of this case by reference to the events which occurred on the Friday (and thus prior to the meeting on the Sunday). On that basis it was contended that Mr. Shiel was already out of the picture by the Sunday (by virtue of having failed to offer €500,000 by close of business on the Friday). However it does not seem to me that that fact is, of itself, necessarily decisive. The test as set out in Banner Homes is as to whether there was detriment to Mr. Shiel or benefit to Mr. McKeon. Mr. Shiel’s position was, undoubtedly, more difficult as of the Sunday than it had been at a time when he might reasonably be described as having been involved in negotiations. However he had already secured an entry into the negotiating process at a time after a sale had been agreed, subject to contract, with Mr. McKeon. The fact that Mr. Glen Sproule would, apparently, have been prepared to accept an offer of €500,000, notwithstanding there having being a previous agreement with Mr. McKeon at €435,000, shows that until such time as there were binding legal arrangements between Mr. McKeon and the Sproules, Mr. Shiel retained an opportunity to buy the property.
5.2 Whatever views may be held in relation to a party attempting to outbid a competitor whose offer has been accepted (and there has been much recent debate about so called “gazumping”), the fact remains that on the current state of the law in this jurisdiction a party is legally entitled to make a bid up and until the time when legally enforceable relations are entered into with another party. The very fact that Mr. McKeon was not anxious that Mr. Shiel be aware that he had no intention of going ahead with their arrangement until after he (Mr. McKeon) had in his possession a legally enforceable contract, shows that keeping Mr. Shiel off-side was considered by Mr. McKeon to be of some value to him. In the circumstances it seems to me that the test of benefit or detriment as set out in Banner Homes is met.
5.3 However it seems to me that I need to consider the undoubted fact that Mr. Shiel, in going into the meeting on the Sunday, was aware that his position had been significantly damaged by his failure to make the required bid by close of business on the previous Friday and, most importantly, that Mr. McKeon was not aware of that fact, under another heading.
5.4 Obviously so far as the formulation of contractual relations are concerned parties are not under any obligation to reveal facts which might place them at a negotiating disadvantage save in the limited exceptional cases in respect of which utmost good faith is required and subject to the requirement not to engage in misrepresentation. If this case were concerned with the specific performance of a contract then the fact that Mr. Shiel acted in that fashion would be of no relevance whatsoever. However in this case Mr. Shiel seeks to enforce an equitable remedy. It is an old adage that “he who seeks equity must do equity”. In the circumstances I have to consider whether it would be inequitable for Mr. McKeon not to comply with the informal arrangement which, I am satisfied, was arrived at on the Sunday. However in assessing whether that would be inequitable, I must also have regard to whether it would be inequitable to allow Mr. Shiel to benefit from such an arrangement where it was entered into by him in circumstances where he was aware that Mr. McKeon was under a misunderstanding as to Mr. Shiel’s negotiating position.
5.5 Under this heading I am satisfied that the distinction which counsel for Mr. McKeon sought to draw between this case and the other cases in which a Pallant v. Morgan equity have been found to exist, is correct. In all the other cases the parties were competing bidders at arms length where neither party had, apparently, any particular advantage in the negotiations or in respect of an upcoming auction. Indeed item (4) in the passage from Banner Homes referred to at para. 3.3 above speaks of a detriment to seeking to acquire the property on “equal terms”.
5.6 Where a party, such as Mr. Shiel, wishes to rely on equitable principles then it seems to me that he must also be shown to have done equity. While there may be reason to understand his attempt to gazump Mr. McKeon (on the basis that he was aggrieved at not being reverted to having been, at one stage, so far as he concerned, the highest bidder) it does not seem to me that he can invoke equitable principles when he procured the arrangement upon which he relies in circumstances where he was aware that Mr. McKeon was unaware of the fact that his position was far weaker than might otherwise be believed.
6. Conclusion
6.1 In all those circumstances I am satisfied that equity does not require that Mr. McKeon comply with the terms of the informal arrangement. That arrangement was procured in circumstances where one party was, to the knowledge of the other party, unaware of a significant weakness in that party’s position. While under no legal obligation to reveal that weakness, Mr. Shiel does not seek to enforce a legal entitlement. It seems to me that Mr. Shiel has lost his entitlement to resort to equity to pursue the matter by reason of his failure to disclose his weakened position at the meeting on Sunday 14th. While the parties were not, on any view, on equal terms prior to the meeting of the 14th the extent of that inequality was concealed by Mr. Shiel.
6.2 In all the circumstances of the case I therefore dismiss the plaintiff’s claim.
Smelter Corporation of Ireland Ltd. v. O’Driscoll
[1977] IESC 1; [1977] IR 305 (29th July, 1977)
O’Higgins C.J.
1. This is an appeal brought by the plaintiffs from the decision and judgment of Mr. Justice Butler refusing their claim for specific performance of an agreement entered into by the defendant for the sale to them of 55 acres 0 roods and 36 perches of land situate at Carrigrenan in the county of Cork.
2. The plaintiffs are a limited liability company formed for the purpose of establishing in Ireland a smelter or base-metal reduction plant. At the time of the agreement sought to be enforced, the plaintiffs were engaged in the acquisition of land as a suitable site for such a plant in the Little Island area of Cork. The defendant is the owner of the land which is the subject of the agreement, but the negotiations in relation to the agreement were conducted on her behalf by her husband, Michael O’Driscoll, and later by her solicitor who has since died. The agreement necessarily took the form of an option to purchase, and was dated the 25th November, 1969.
3. Under the agreement the plaintiffs, in consideration of the payment of £7,000, were given for 12 months an option to purchase at a price to be determined by Mr. Owen MacCarthy (the well-known arbitrator to the Land Values Reference Committee) on an arbitration specially held for that purpose. Provision was made for the extension of the option for a further period of six months on the payment of a further sum of £3,250 and there were other clauses which are not relevant to the issues raised in this appeal. In the event of the option being exercised, it was provided that the option payments should be credited against the purchase money and, if the option was not exercised for any of the three grounds set out in clause 9, it was provided that one-half of such sums should be returned to the plaintiffs and that, in the meantime, such one-half should be secured on deposit. On the 10th January, 1970, Mr. Owen MacCarthy determined in his arbitration award that the purchase price of the land should be at the rate of £1,500 per acre, which resulted in a purchase price of £82,837.50.
4. By letter dated the 23rd November, 1970. the plaintiffs took a second option for six months for the sum of £3,250 which was thereupon paid to the defendant’s solicitor. A third option for six months was then purchased by the plaintiffs as a result of negotiations between the auctioneer acting for the plaintiffs, Mr. Ahern, and the defendant’s solicitor. The consideration for this option was also £3,250, but this sum was not to be credited against the purchase money should the plaintiffs exercise the option. At the expiration of the third option, a fourth was negotiated as is evidenced by a letter dated the 24th November, 1971, from the defendant’s solicitor to the plaintiffs. This option was for a further six months for a nominal consideration but on the terms that the option monies paid under the original option should now be freed to the defendant and should not be credited against the purchase money in the event of the option being exercised. In effect, this arrangement constituted the ground of a fresh option to purchase for a fixed price of £93,087.50 being £82,837.50 as fixed by Mr. MacCarthy, plus the £10,250 paid in respect of the options under the agreement of 25th November, 1969. By letter dated 15th May, 1972, the plaintiffs purported to exercise this final option. The defendant was unwilling and refused to complete and these proceedings were commenced by the plaintiffs seeking specific performance of the agreement to sell, and associated relief.
5. The defence to the plaintiffs’ claim is based on two main grounds. In the first place it is contended at paragraph 3 of the defence that the option or options to purchase were given by the defendant “subject to a condition precedent that a smelter plant otherwise a base metal reduction plant would be built on the said lands and that the said lands would be used for no other purpose but the plaintiffs do not propose to build or utilise a smelter plant or base metal reduction plant on the said lands and the said condition precedent to the exercise of the said option has not been fulfilled and will not be fulfilled and the plaintiff is thereby debarred from exercising the said or any option.”
6. At paragraph 4 of the defence it is also contended with regard to the option that “the same was obtained from the defendant under duress and coercion whereby the plaintiffs caused or permitted a local authority to clearly give her to understand that if she did not sell the said lands or give an option over the same to the plaintiffs for the purpose of a smelter plant or base metal reduction plant, then the said lands would be acquired by compulsory acquisition by the said local authority and given to the plaintiffs for the stated purpose, and the defendant believed that this threat would be carried out to her damage and it was further represented to the defendant that she had a national and patriotic duty to permit employment on a large scale to be afforded by the plaintiffs at the said smelter plant or’ base metal reduction plant and it was in those circumstances and only on the understanding and pre-condition, express or implied, as hereinbefore indicated, that the defendant afforded such option to the plaintiffs.”
7. To assess the validity of these two grounds of defence or of either of them, regard must be had to the evidence adduced at the trial before the learned High Court judge. Apart from the documents already referred to which relate to evidence of the option arrangements entered into between the parties. it appears that much happened before these arrangements became possible. The plaintiffs had engaged Mr. Ahern (the principal of Marsh & Co., auctioneers) to conduct negotiations on their behalf with local land owners including the defendant.
8. On behalf of the plaintiffs Mr. Ahern interviewed the defendant’s husband and offered £800 per acre for the land which was subsequently the subject of the options. Believing that the Cork County Council as the planning authority had power under s. 77 of the Local Government (Planning & Development) Act, 1963, to acquire these lands compulsorily for the development contemplated by the plaintiffs, and further believing that, as a matter of probability, this power would be exercised, Mr. Ahern so informed the defendant’s husband. He did this in good faith, as the learned trial judge has found, believing his statement to represent the reality of the situation facing the defendant. Mr. Ahern followed up this verbal statement with a letter dated the 11th August, 1969, which was written to the solicitor acting for the defendant. in this letter he again made an offer of £800 per acre but added:— “We are suggesting that, since the probability of a compulsory purchase order being made is admitted, the necessity of having the order made be dispensed with and that the value of the land be submitted to an independent arbitrator acceptable to both parties, and that both parties be bound by his decision.” This letter was a clear indication of Mr. Ahern’s view, as the negotiator on behalf of the plaintiffs, that if the £800 per acre was not acceptable the defendant ought to agree to the price being determined by an independent arbitrator in order to avoid a compulsory purchase order.
9. It seems clear that the defendant’s solicitor did not doubt for a moment the soundness of the view expressed by Mr. Ahern, and that subsequent negotiations were conducted on the basis that, if agreement was not possible, compulsory purchase would be the next step.
10. It appears that Mr. Filer, the managing director of the plaintiffs, was made aware of the manner in which Mr. Ahern was negotiating with the defendant, and of the arguments and representations he used and made. This appears from the fact that at the end of August, 1969, Mr. Filer was given Mr. Ahern’s complete file of correspondence which included the letter of the 11th August.
11. Despite the efforts of Mr. Ahern, the defendant, through her husband, could not be persuaded to sell although the offer made on behalf of the plaintiffs was substantially increased.
12. By the 9th October, 1969, all negotiations had come to an end and the possibility of the plaintiffs securing the defendant’s lands by agreement seemed remote in the extreme. On that date a number of people, representing the plaintiffs, called to the County Hall in Cork which is the headquarters of the Cork County Council. These included Mr. Filer, the managing director and Mr. Ahern, the auctioneer. They there met the county manager, Mr. Conlon, the chairman of the County Council, Mr. Michael Pat Murphy, the vice-chairman, Mr. Denis O’Sullivan, and the development officer, Mr. David Murphy. There appears to have been some slight conflict in the evidence at the trial as to the immediate purpose of this meeting. However, it is clear that following this meeting the county manager, the chairman, the vice-chairman, Mr. Ahern and the development officer went in a body to see the defendant’s husband for the purpose of urging him to resume negotiations with the plaintiffs for the sale of the land. There was again a conflict in the evidence at the trial as to what was said at this interview with the defendant’s husband. The defendant’s husband maintained that it was made clear to him by the gentlemen who called to see him that, if he was not willing to sell, the lands would be acquired compulsorily by the County Council. This was disputed by the County Council witnesses. However, the learned trial judge was satisfied that at this interview there had been a reference to the compulsory purchase of the lands and that this, coupled with what had previously been said and written by Mr. Ahern, operated on the mind of the defendant’s husband. This, of course, is a finding of fact by the learned trial judge which is binding on this Court.
13. On the following day the defendant’s husband telephoned the development officer to say that he was prepared to negotiate with the plaintiffs, and the agreement was executed on the 25th November, 1969.
14. At the trial it was made clear by the county manager when he gave evidence that the belief held and expressed by Mr. Ahern was incorrect. The county manager made it perfectly clear in his evidence that there was no question of the County Council acquiring these lands for the plaintiffs. Whatever views he may have had as to the Council’s powers in this respect. he said that such an exercise of compulsory acquisition had never been attempted and certainly was neither planned nor contemplated in this case. From this it follows that all suggestions made to the defendant’s husband, to the effect that if the lands were not sold voluntarily they would be acquired compulsorily, were ill-founded.
15. I now turn to the grounds relied on by the defendant for resisting the order for specific performance claimed in this case. I wish to say at once that I find no substance in the first ground of objection. In my view, the purpose for which the plaintiffs sought to purchase lands or the use to which they intended to put them in no way affected the transaction. I can see no basis for suggesting that the proposed acquisition of the defendant’s lands depended on the smelter project proceeding.
16. However, the second objection must be viewed in a different light. Specific performance is a discretionary remedy. The discretion to grant or refuse the relief must be exercised in a manner which is neither arbitrary
nor capricious but which has regard to the essential fairness of the transaction involved. In effect, it is here suggested that the defendant was coerced or forced into granting the option or options to the plaintiffs by the threat of compulsory purchase. It does not seem to me on the evidence that a threat, as such, was ever used. At the same time it seems perfectly clear that the defendant was at a serious disadvantage.
17. The defendant’s husband, who acted for her throughout the negotiations, believed that if there was not a voluntary sale there would be a compulsory acquisition of the lands. lie so believed because he was told this by the plaintiffs’ agent, Mr. Ahern. it is quite clear that this view was repeated to him by the defendant’s solicitor, and on the 9th October, 1969, further corroboration was provided by those who came to see him and who represented Cork County Council. Believing this to be the situation, there was no real purpose in refusing to sell or to give an option once, as was suggested, the price was to be determined by an agreed arbitrator. To refuse in these circumstances meant acquisition anyway, and the determination of the price by an arbitrator in whose appointment the defendant might have no say. It now transpires that the situation was not as was intimated to the defendant’s husband. it is now clear that, at the time that these negotiations were proceeding, the County Council had no plans whatsoever to interfere by way of the compulsory acquisition of the defendant’s lands.
18. It is well established that the discretion to grant specific performance should not be exercised if the contract is not equal and fair. In this instance the defendant was under a fundamental misapprehension as to the true facts. This misapprehension was brought about by the plaintiffs’ agent, Mr. Ahern. While Mr. Ahern acted bona fide, this does not alter the situation which he created. He led the defendant’s husband and her solicitor to believe that, if the defendant did not agree to sell, the lands would be acquired. It appears clear also that the plaintiffs’ managing director was aware of the true position so far as compulsory acquisition was concerned. It is to be noted that he had Mr. Ahern’s file of correspondence and, therefore, should have been aware of the incorrect picture which Mr. Ahern had painted. Nevertheless, the plaintiffs’ managing director allowed the negotiations to proceed.
19. In these circumstances it appears to me that there was a fundamental unfairness in the transaction. The defendant agreed to sell believing that she had no real option, and the plaintiffs accepted her agreement to sell knowing that this was not so. In my view it would create a hardship and would be unjust to decree specific performance in this case. I agree with the decision of the learned trial judge. I would refuse specific performance but would order that all monies paid to the defendant by the plaintiffs be returned to the plaintiffs by the defendant.
Kenny J.
I agree.
Carroll v. Carroll
[1999] IESC 11
Denham J.
1. This is an appeal by the defendant from the decision of the High Court (Shanley J.) delivered on the 5th March, 1998, reported at [1998] 2 ILRM 218, wherein he held that a deed of the 3rd May, 1990, should be set aside.
2. This action was at hearing before the High Court on the 19th, 20th and 24th February, 1998, when, inter alia, oral evidence was heard. Facts were found by the learned trial judge commencing with the fact that the plaintiffs brought the action to set aside a conveyance made on the 3rd May, 1990, on the grounds that (a) the conveyance was procured by undue influence, and (b) that it was in itself an improvident transaction. The property in question is a public house together with residential accommodation situated at Burke Street, Fethard, Co. Tipperary, which was owned in fee simple by Thomas Carroll senior. By the conveyance of the 3rd May, 1990, Thomas Carroll senior conveyed his interest in the premises to his son, Thomas Carroll junior, “in consideration of the natural love and affection which Thomas Carroll bears for his son, Thomas Carroll” subject only to a right of Thomas Carroll senior to reside in the dwelling house attached to the public house for the remainder of his lifetime. The plaintiffs are the legal personal representatives of Thomas Carroll senior, who is deceased and the defendant is the legal personal representative of Thomas Carroll junior, who is also deceased.
Family history
3. The learned trial judge made clear findings of fact in relation to the family. This litigation arises as a result of events occurring in the Carroll family. In 1959 , Thomas Carroll senior married. He purchased a public house by conveyance dated the 31st December, 1960, wherein the premises at Burke Street, Fethard, Co. Tipperary, were conveyed to Thomas Carroll senior. Thomas Carroll senior was then in his late 40’s and suffering from arthritis. The public house business was run by his wife Sarah, also known as Sadie. Three children were born to Thomas Carroll senior and Sarah being the first plaintiff, born on the 20th February, 1962, Thomas born on the 11th August, 1964, and the second plaintiff born on the 8th January, 1968. They were a happy family. The children started at local schools, the first plaintiff spent her last two years of schooling at a boarding school and the second plaintiff spent five years as a boarder in Loretto Convent in Rathfarnham and then did a commercial course in Alexandra College. Thomas was not particularly interested in academic studies, his main interest was farming. A number of his uncles had farms near Fethard. Thomas Carroll junior spent much of his time working on the farms and helping his uncles. The family lived in the accommodation attached to the public house. The profit from the business of the public house maintained the family. The children helped in the running of the public house and from 1974, Sadie Carroll engaged the services of a full-time barman. The first plaintiff, after her schooling, obtained a job as a secretary in Dublin where she lived and travelled home to Fethard every weekend. She got married in 1986. Unfortunately her husband was unwell and ultimately in February, 1988, her marriage was annulled. The first plaintiff obtained a loan from a building society and purchased a house in Dublin. She resides there with the second plaintiff. The second plaintiff obtained a job after she left Alexandra College and lived with the first plaintiff. Every weekend they, the plaintiffs, would travel to Fethard and help in running the public house.
4. Thomas Carroll junior, after finishing his schooling, spent a short time in Dublin and then returned to farming and helped his uncles in the running of their farms. In consideration of Thomas Carroll junior looking after his uncles, Patrick and Philip, and agreeing to reside with them if required to do so, and in consideration of him helping in the management of the farms, on the 22nd April, 1988, Thomas Carroll junior was registered as full owner of farmlands in Milltown, Co. Tipperary, as tenant in common of one undivided third share of the property, a farm of 185 acres. Also, Thomas Carroll junior helped his uncle Gus at his farm and when his uncle died in the early 1990’s Thomas Carroll junior was left one half of the farm at Killustry, Co. Tipperary, which amounted to about 45.2 acres.
5. Sadie Carroll died of cancer on the 13th June, 1989. She had been ill for some time prior to her death during which time her daughters went home as often as possible and in any event every weekend. When she became too ill to work Thomas Carroll junior assumed control of the business during the week. At weekends the plaintiffs helped in the running of the public house. The learned trial judge in Carroll v. Carroll 1998] 2 I.L.R.M. 218 at pp. 221 to 223, found the facts at the time of the death of Sadie Carroll as follows:-
“Her husband was devastated. At the time of her death, he was in his late 70s and suffered from a number of health complaints; he had severe arthritis which caused him a huge amount of pain and limited his mobility to a great extent. He had a heart complaint which had necessitated two minor operations for the implant of a pacemaker for his heart. He was suffering from a hearing deficit and also suffering from poor sight. Whilst all of these elements meant that he was, to a large extent, dependant upon his children to do things on his behalf, there was no evidence to suggest that his mind was in any way impaired at that stage. He was, of course, extremely depressed at the passing of his wife and the phrase ‘devastated’ was used by a number of witnesses to describe the impact his wife’s death had upon him.
After the death of Sadie Carroll, Mary Jane stayed at Burke Street for a period of six months and during that time helped in the running of the public house and assisted her father in relation to day to day chores. Although Thomas had obligations in relation to his uncles at the Milltown farm, he nonetheless helped out in the running of the public house business and eventually he assumed responsibility for that business on a day-to-day basis. After the girls returned to Dublin, they came home to Fethard every weekend and when they were there at the weekends they also helped out in the public house. The business of the public house was ‘in the name of’ Thomas Carroll senior, it had never been in the name of Sadie Carroll or any other member of the family. There was a liability of the business to the Revenue Commissioners in respect of value added tax of some £20,000. Thomas Carroll junior was concerned to raise money to pay off and discharge this liability to the Revenue Commissioners. He spoke to his sister Winifred about the possibility of the business being transferred from his father’s name into his name. Winifred Carroll recalls explicitly her brother asking her to ask her father to agree to sign over the running of the business to Thomas Carroll junior. Initially she said no, but eventually she did ask her father to let her brother run the business for the time being. Mary Jane Carroll recalls her brother mentioning the need to transfer the business to him for certain tax reasons, and she further recalls that some weeks later her brother told her that papers had been signed and that he would be running the business in the future. Winifred Carroll recalls being told by her father that Philip Joyce, a solicitor, had been in the family kitchen and that he, her father, had signed papers but that the papers just related to the running of the business. Winifred Carroll believed that the transfer of the running of the business to her brother from her father, was merely a temporary arrangement until she herself was in a position to come back home to Fethard to run the public house business. Mary Jane Carroll, on the other hand, believed that the transfer of the business to her brother was of a more permanent nature. Neither of the two daughters believed that their father had transferred any ownership in the property at Burke Street to their brother. Both of the daughters firmly believed that it was always the intention of their parents to treat the three children equally in terms of such assets as the parents had to divide among their children. Both Winifred and Mary Jane Carroll were encouraged and comforted in this view by their father regularly saying to them that their home would always be there for them. They recalled him saying this both before and after the transfer dated 3 May 1990 – which is the transfer in dispute in this case. Neither of the girls believed that their father had intended to transfer any ownership in the property to their [brother] by the deed of the 3 May 1990. While that is so, there is no suggestion from them that their [brother] in any way bullied or cajoled their father into transferring the property to him. Each of them is satisfied that, had the father in fact intended to transfer the property in the premises to their [brother] in 1990, he would have told each of his daughters that that was what he had done.”
The transfer
6. The transfer in issue was executed on the 3rd May, 1990. Mr. Philip Joyce, solicitor, gave evidence to the High Court that he was contacted by Thomas Carroll junior in respect of the transfer of premises from Thomas Carroll senior to Thomas Carroll junior. He was told that there was a V.A.T. liability that Thomas Carroll junior was anxious to discharge. Mr.Joyce recalled visiting Thomas Carroll senior and sitting with him in his kitchen and discussing the question of the transfer. He recalled that Thomas Carroll senior told him he wanted his son to have the premises without conditions. Mr. Joyce recalled telling Thomas Carroll senior that he should have a right of residence in and maintenance and support out of the premises. The first meeting lasted 15 minutes and Mr. Joyce then prepared a draft transfer which he sent to Thomas Carroll junior. The draft contained provision for a right of residence and a right to be maintained and supported out of the premises but Mr. Joyce recalled Thomas Carroll junior responding that Thomas Carroll senior did not want any maintenance or support in the deed. Mr. Joyce visited Thomas Carroll senior for a second time, Mr. Joyce recalled going to the meeting with two engrossed deeds, one contained a maintenance and support provision and the other did not; according to Mr. Joyce, Thomas Carroll senior stated that he did not want to have any provision as to maintenance and support in the deed. This second meeting lasted fifteen to twenty minutes. Mr. Joyce said he was satisfied that Thomas Carroll senior understood matters fully. Thomas Carroll senior executed the deed which provided merely for a right of residence.
No attendance note
7. Mr. Joyce kept a file relating to the transaction. There is no attendance note of either of the meetings Mr. Joyce had with Thomas Carroll senior. This is most unfortunate. There is correspondence on the file, but it is all directed to Thomas Carroll junior.
Client
8. Mr. Joyce has acted for more than one member of the family. As the High Court (Shanley J.) found at pp. 223 and 224:-
“Given the nature of his initial instructions which were relayed to him by Mr. Carroll junior, it was understandable that Mr. Joyce was somewhat uncertain as to whom, strictly speaking, he was acting for in relation to the conveyancing transaction: on one view of events he believed that he was acting for Mr. Carroll senior up until the transfer had been completed, and that thereafter he acted for Mr. Carroll junior. That he acted for Mr. Carroll junior thereafter is beyond doubt in that the file contains correspondence directed to financial institutions on behalf of Mr. Carroll junior, and contains undertakings given by Mr. Joyce on behalf of Mr. Carroll junior to those financial institutions. While on one view of matters Mr. Joyce believed that he could be said to be acting for Mr. Carroll senior up until the completion of the transfer, he quite properly allowed that his position was most probably that of a family solicitor who was, in fact, acting for both the transferor and the transferee of the property.”
9. Mr. Joyce is now solicitor for the defendant in these proceedings.
Assets
10. The learned High Court Judge found that Mr. Joyce made no inquiries of Thomas Carroll senior as to whether he had any other assets apart from the premises the subject of the transfer. In light of the absence of clauses for maintenance and/or support this is a serious matter for consideration. Mr. Joyce did not believe he had any obligation to satisfy himself that Thomas Carroll senior had any other assets to support himself on the transfer of the premises in issue. The effect of the transfer was that practically all Thomas Carroll senior’s assets were transferred to Thomas Carroll junior subject only to the right of residence.
Children
11. It was also found as a fact that Mr. Joyce did not ask any questions concerning other children of Thomas Carroll senior. Nor did he know of the close knit relationships in this family.
Mr. Thomas Carroll senior
12. Mr. Joyce did not accept that he should have adverted to the possibility that Thomas Carroll junior would not support Thomas Carroll senior out of the assets nor the possibility that Thomas Carroll junior might die before Thomas Carroll senior leaving him without any financial income. The learned trial judge found that Mr. Joyce was firm in his view that he got “clear and unambiguous instructions” from Thomas Carroll senior. Between the 3rd May, 1990, and the 20th March, 1992, when he died, Thomas Carroll senior did not tell his daughters of the transfer of the property. In that time the plaintiffs continued to travel to Fethard each weekend and to help with the public house business. Thomas Carroll junior ran the business during the week. During those two years Thomas Carroll senior’s eyesight deteriorated, his arthritis and pain got worse, his hearing and general health deteriorated.
The defendant
13. Michelle Fogarty met Thomas Carroll junior in 1991 or early 1992. They married in September, 1993. She recollected that Thomas Carroll junior told her that he owned the premises. She lived in the public house prior to their marriage. When the barman was off duty she worked in the public house. Thomas Carroll junior spent most of his time on the farm. After their marriage they continued to live at the premises and the plaintiffs continued to go to Fethard each weekend and help in the running of the public house. Thomas Carroll junior died as a result of a road traffic accident on the 17th January, 1994. He owned a portion of the Killusty farm in Co. Tipperary and had an interest in the Milltown farm in Co. Tipperary as well as the premises in issue.
14. Shortly after her husband’s death the defendant asked the plaintiffs to give her a lift to Mr. Philip Joyce’s office. They saw Mr. Joyce also who told them that they, the plaintiffs, had no rights in the premises in Burke Street. The plaintiffs were devastated. However, they continued to travel to the premises at weekends. Tensions grew between the plaintiffs and the defendant. Matters came to a head in June, 1994. Allegations were made by the plaintiffs against the defendant. The defendant alleged that the first plaintiff said to her “You were never good enough for him”. After this the plaintiffs did not stay at the premises at the weekends. Steps were taken and these proceedings were commenced in which the plaintiffs succeeded in the High Court. Against that decision the defendant has appealed.
Appeal
15. The notice of appeal brought by the defendant was, inter alia , on the following grounds:-
1. that the learned trial judge erred in law in finding
that the presumption of undue influence arose having regard to the fact that evidence was given by the plaintiffs that Thomas Carroll junior had not exerted undue influence on the mind of Thomas Carroll senior;
2. that the learned trial judge erred in law in finding
that any presumption of undue influence was not capable of being rebutted or displaced by:-
(a) the evidence of the clarity of mind of
16. Thomas Carroll senior at the time of making the deed;
(b) the availability of independent legal advice;
(c) the admission in evidence by the plaintiffs
that Thomas Carroll junior had not exerted any such undue influence;
3. that the learned trial judge had erred in law
and fact in failing to give due weight to evidence on behalf of the defendant;
4. that the learned trial judge’s findings were
contrary to and against the weight of the evidence;
5. that the learned trial judge erred in fact and
law in finding the said transaction improvident having regard, inter alia, to the clarity of mind of Thomas Carroll senior in and about that time and the availability of independent legal advice.
Submissions
17. Counsel for the defendant, in oral submissions, on the issue of undue influence quite correctly accepted that the relationship between Thomas Carroll senior and Thomas Carroll junior and the circumstances in which Thomas Carroll senior found himself were such as to raise the presumption of undue influence. He argued that such presumption is only a presumption and is rebuttable. He submitted that it can be rebutted by:-
(a) Independent advice, whether legal or other qualified
advice, while such independent legal advice is not essential to rebut the transaction, see Provincial Bank of Ireland v. McKeever [1941] I.R. 471; Hilary Delany, “Equity and the Law of Trusts in Ireland”, Dublin, 1996.
(b) Evidence that having received advice but contrary to
same he decided to continue with the transaction as an exercise of his own free will, see Inche Noriah v. Shaik Allie Bin Omar [1929] A.C. 127; Gregg v. Kidd [1956] I.R. 183.
(c) Evidence that no influence such as the court has to
presume was in fact exercised, see Reg. (Proctor) v. Hutton [1978] N.I. 139; Grealish v. Murphy [1946] I.R. 35; O’Rorke v. Bolingbroke [1876-7] 2 App. Cas. 814.
18. On the issue of improvident transactions counsel for the defendant submitted that for equity to intervene in a transaction there must be three elements established, with the onus on the plaintiffs, namely: (1) one party at a serious disadvantage to the other; (2) transaction at a gross undervalue; (3) lack of independent legal advice. Counsel for the defendant submitted that it is necessary to show some unconscientious use of power by the stronger against the weaker, Hart v. O’Connor [1985] AC 1000. He submitted that the transaction has to be seen in the light of all circumstances of the parties and their motives at the time, see Reg. (Proctor) v. Hutton [1978] N.I 139.
19. Counsel for the defendant in relation to laches/acquiescence, submitted that it has long been accepted that failure to seek relief will bar same, especially where it is sought to set aside a transaction upon which the other party has acted, Allcard v. Skinner (1887) 36 Ch.D. 145; Keane “Equity and the law of Trusts in the Republic of Ireland”; H.(J.) v. H.(W.J.) (Unreported, High Court, Keane J., 20th June, 1989). He argued that acquiescence will always be a bar to equitable relief, Delany, “Equity and the Law of Trusts in Ireland”; McCausland v. Young [1949] N.I. 49.
20. Counsel for the defendant submitted that having regard to the express evidence of both of the plaintiffs that at no stage did their brother unduly influence their father to make the transaction of the 3rd May, 1990, that that of itself must be sufficient to rebut the presumption that he did so influence his father having regard to the decision of Lowry L.C. J. in Reg. (Proctor) v. Hutton [1979] N.I. 139. He argued that even assuming that such evidence was not available there is clear evidence to the effect that on the date of the transaction Thomas Carroll senior was in full possession of all his faculties and had received appropriate advice as to the nature of the transaction and how his interest could be safeguarded; having considered this advice and chosen not to follow same was the exercise of his own free will and therefore in accordance with the principles set out by Hailsham L.C. in Inche Noriah v. Shaik Allie Bin Omar [1929] AC 127. He submitted that looking at the transaction and the nature of same the learned trial judge erred in fact and that he substantially overvalued the premises in question contrary to the evidence which had been given and failed to have due regard to the debts and liabilities in relation to same which would be taken on by Thomas Carroll junior. He submitted that in holding that the presumption of undue influence had not been rebutted the learned trial judge failed to have any regard to the evidence of the plaintiffs to the effect that there had been no undue influence by or on behalf of Thomas Carroll junior. Further he submitted that in holding the transaction was an improvident transaction the learned trial judge failed to have any regard to the relationship between Thomas Carroll senior and Thomas Carroll junior and the circumstances in which the plaintiffs found themselves, they were settled and working in Dublin and it was long established custom that the business would be transferred to a child, usually the eldest son. He submitted that in deciding that Thomas Carroll senior had not received adequate independent legal advice the learned trial judge failed to consider the evidence of Philip Joyce in that regard or the evidence of Mr. Eoin Binchy. Further, counsel for the defendant submitted that, the learned trial judge had erred on the issue of laches, as the learned trial judge had failed to have due regard to the fact that Thomas Carroll senior survived the transaction by a considerable period of time and was at all times in full possession of his mental faculties and in communication with his daughters on a constant basis and he failed to express any dissatisfaction with the arrangement or the fact that the same had not been procured by the exercise of his own free will. Further, he submitted that the learned trial judge failed to have any regard to the fact that, subsequent to the death of their father and notwithstanding their expressed views that they did not feel that the premises were owned by their brother, the plaintiffs failed to take any steps to clarify the situation in relation to the premises and it was only after the tragic death of their brother and their subsequent disagreements with the defendant that they took any steps to challenge the transaction where both parties to same were dead.
21. Counsel for the plaintiffs, submitted that the learned trial judge in his assessment of fact and law was right and that his conclusion was well warranted on the evidence. Counsel for the plaintiffs submitted that the matter of undue influence is displaced by evidence that clear advice and a full explanation of the circumstances were given. However, in this case there is limited evidence as to advice given and there is no full explanation of the circumstances. As regards the independence of Mr. Philip Joyce he pointed out that it had been stated he was the family solicitor, but that in fact Mr. Joyce was engaged by Thomas Carroll junior and paid by Thomas Carroll junior, and that the name on the file was that of Thomas Carroll junior. Further, it was pointed out that Mr. Philip Joyce is the same solicitor who is now acting for the defendant. In fact, as can be seen in the papers, when Mr. Philip Joyce wrote to the bank after the conveyance in issue he said “my client, Thomas Carroll junior.” He submitted that Mr. Philip Joyce could not have fully explained the consequences of the transfer to Thomas Carroll senior, for Mr. Philip Joyce did not know the family relationships, nor he did not know of Thomas Carroll senior’s other assets, if any. It was impossible to explain what he did not know. Counsel for the plaintiffs submitted that counsel for the defendant had referred to the fact that there was no evidence that Thomas Carroll senior lacked the appropriate mental capacity. He submitted that this is not a case that Thomas Carroll senior was not compos mentis. The issue of undue influence is not about that kind of person. It is not that category of infirmity. He submitted that counsel for the defendant was wrong in the test he had suggested for the Court. As regards reading over the deed counsel for the plaintiffs submitted that the onus is on the defendant, who is seeking to rebut the presumption of undue influence, to produce the evidence that the deed was read over to Thomas Carroll senior. That absence was adverted to in the trial. The opportunity to recall witnesses and to deal with that matter was not taken up by counsel. This specific matter was referred to in the High Court. He submitted that there was no evidence that the transfer was read over to Thomas Carroll senior.
22. Counsel for the plaintiffs submitted that the improvidence argument revolves around Grealish v. Murphy [1946] I.R. 35 . With the adjustment of a single fact one can demonstrate the improvidence. If Thomas Carroll senior survived until today, when his daughter-in-law had remarried and had a family, then Thomas Carroll senior would be a sick, depressed and disabled man with no security for his care or medical care.
23. Counsel for the plaintiffs argued that Thomas Carroll junior assumed the V.A.T. liability of £20,000. However, he submitted that the evidence established that the liability was discharged out of the proceeds of the business. Thomas Carroll junior took on the liability, the bank loan, but he got that liability with the means to discharge it, i.e, the income from the business.
24. He submitted that there were three important matters of fact: –
1. The status of Thomas Carroll senior. Thomas
25. Carroll senior was devastated, depressed, dependant, infirm, sad and lonely. He might have seemed to be in a satisfactory position to a solicitor, but he was unlikely to confide his depression in his solicitor
2. It was reiterated repeatedly by the plaintiffs that
their father had regularly said that there would always be a home for them there. This was properly relied upon by the learned trial judge. This was evidence when considering whether Thomas Carroll senior understood what he had done, it was a relevant factor for analysis. Thomas Carroll senior was not a deceitful person. He was fair to all his children. He was a fond family man. He was unlikely to practice deception on his daughters. There was an incongruity in these facts.
3. Counsel for the plaintiffs referred to the evidence of
26. Mr. Philip Joyce. He pointed out that Mr. Philip Joyce was engaged by Thomas Carroll junior. The whole process was Thomas Carroll junior’s enterprise. Further Mr. Philip Joyce stated repeatedly “those were my instructions”. But that was not all he needed to do. Mr. Philip Joyce needed to explain fully and to give clear advice. Mr. Philip Joyce did not seem to know that the very transaction he was dealing with, would leave Thomas Carroll senior with nothing. Counsel for the plaintiffs referred the Court to the transcript where Mr. Philip Joyce referred on a number of occasions to the fact that he had to “take instructions”. Counsel for the plaintiffs argued that the law requires a different treatment to elderly men who are giving away all their property. The attitude that he was bound by “my instructions”, was a mistake on the part of Mr. Joyce. The instructions were not the key. It was not that kind of transaction. There needed to be clear explanations and clear advice to Thomas Carroll senior to displace the presumption. He submitted that it was evident that there were no instructions given as to Thomas Carroll senior’s assets or lack of them. On this ground alone he submitted the deed should be set aside. Without knowledge of that fact Mr. Philip Joyce could not give advice. Thus, he submitted, the solicitor was under a misapprehension as to his duty. It was not merely a question of obtaining instructions, it was a duty to give advice. Counsel for the plaintiffs referred to the 0’Flanagan v. Ray-Ger Limited (Unreported, High Court, Costello J., 28th April, 1983); Gregg v. Kidd [1956] I.R. 183, at pp. 195, 196 and Grealish v. Murphy [1946] I.R. 35 at pp. 49 and 50.
Undue influence – decision
27. There are two classes of transactions which may be set aside on the grounds of undue influence. They were described by the House of Lords (in the judgment of Cotton L.J) in Allcard v. Skinner (1887) 36 Ch.D. 145 at p.171 as:-
“The question is – Does the case fall within the principles laid down by the decisions of the Court of Chancery in setting aside voluntary gifts executed by parties who at the time were under such influence as, in the opinion of the Court, enabled the donor afterwards to set the gift aside? These decisions may be divided into two classes – First, where the Court has been satisfied that the gift was the result of influence expressly used by the donee for the purpose; second, where the relations between the donor and donee have at or shortly before the execution of the gift been such as to raise a presumption that the donee had influence over the donor. In such a case the Court sets aside the voluntary gift, unless it is proved that in fact the gift was the spontaneous act of the donor acting under circumstances which enabled him to exercise an independent will and which justifies the Court in holding that the gift was the result of a free exercise of the donor’s will… In the second class of cases the Court interferes, not on the ground that any wrongful act has in fact been committed by the donee, but on the ground of public policy, and to prevent the relations which existed between the parties and the influence arising therefrom being abused.”
28. This case arises under the second class of case. Counsel for the defendant quite rightly accepted that this case falls into the latter category. He acknowledged that the relationship between Thomas Carroll senior and Thomas Carroll junior and the surrounding circumstances gave rise to the presumption of undue influence.
29. The legal situation arising on such relationship being established was described in “Equity and the Law of Trusts in Ireland” by Hilary Delany at p. 482 as:-
“Once a relationship giving rise to a presumption of undue influence is established, and it is shown that a ‘substantial benefit’ has been obtained, the onus lies on the donee to establish that the gift or transaction resulted from the ‘free exercise of the donor’s will’. As Dixon J put it in Johnson v. Butress, the evidence must establish that the gift was ‘the independent and well-understood act of a man in a position to exercise a free judgment based on information as full as that of the donee’. The manner in which this presumption may be rebutted relates to two main issues; first, the question of whether independent legal advice has been received and secondly, whether it can be shown that the decision to make the gift or transfer was ‘a spontaneous and independent act’ or that the donor ‘acted of his own free will’.”
30. I adopt this analysis of the law and apply it. In this case the presumption is established and a substantial benefit was obtained thus the onus lies on the donee, the defendant, to establish that the transfer was the free exercise of the will of the donor, Thomas Carroll senior. Thus, it was for the defendant to provide the evidence that the transfer was the independent and free gift of Thomas Carroll senior. The issue then arising is whether there was evidence upon which the learned trial judge could be satisfied that the presumption was not rebutted. In analysing this the first matter is that of independent legal advice. Although it was submitted that Mr. Joyce was the family solicitor on the evidence he appears to have been predominantly that of Thomas Carroll junior. The legal advice relied upon was given by Mr. Joyce. Mr. Joyce was engaged and paid by Thomas Carroll junior. It was Thomas Carroll junior’s name which was on the file. In his evidence Mr. Joyce referred to “his instructions”. He appeared to misconceive his duty. Further, Mr. Joyce did not know that the asset being transferred was practically the sole asset of Thomas Carroll senior and so could not advise him fully or explain the consequences of his action. Nor did he know of the family, the relationships with the daughters, and so could not advise on this matter either. In light of the absence of this information he could not advise Thomas Carroll senior appropriately.
31. In considering whether Thomas Carroll senior acted of his own free will an important matter was whether or not the transfer was read over to Thomas Carroll senior. There was no evidence of this even though the defendant was given an opportunity in the High Court to address the matter.
32. This case is not about the presence or absence of mental capacity. The onus is on the defendant to produce evidence to dislodge the presumption of undue influence.
33. The learned trial judge concluded, on this aspect of the case, at p.230 that:-
“I am not satisfied that the [defendant] has established as a matter of probability that the transaction was the result of the free exercise of the donor’s will such as to rebut the presumption of undue influence. Mr. Joyce allowed that in substance and fact he was acting as the ‘family solicitor’ in the transaction for both parties. He saw the donor on two occasions for a total of about 35-40 minutes, not all of which was devoted to the business of the transfer. It is clear that the donor never read the transfer deed nor had it read to him by anyone else. While its contents were apparently discussed between him and Mr. Joyce, I am not satisfied that any real consideration was given to the fact that the donor (a frail man, in dependant circumstances) was disposing of all his real assets without reserving to himself (by way of a revocation clause or by way of charging the property with his maintenance and support), any protection for his own future particularly in the event of a falling out with his son, or in the event of his son predeceasing him. It is, I think, clear that Philip Joyce was not aware of the family’s circumstances either in the context of the position of the other members of the family, the totality of the assets held by the family members or the assurances given by the donor to other members of the family including the plaintiffs as to their user of the Burke Street premises during their lifetimes. Thus, while I accept the evidence (which was not really disputed) that the donor was a man who was mentally alert at the date of the transfer, I am not at all happy that at the date of the transfer he had the necessary independent advice (whether it was that of a legal advisor or a competent and qualified lay person) such as would persuade me that the transaction was made of his own free will.”
34. There was evidence before the learned trial judge upon which he could reach these conclusions of fact. Thus, I would affirm his determination.
35. Counsel for the defendant submitted that for the plaintiffs to succeed there should be evidence that Thomas Carroll junior exercised undue influence on Thomas Carroll senior. This submission was at the core of the appeal. Counsel argued strongly that as Thomas Carroll junior himself had not unduly influenced his father that was sufficient to rebut the presumption. He argued that in this case Thomas Carroll junior did not exercise undue influence, or in counsel’s word, “wiles” on Thomas Carroll senior. That being the case, it being accepted that Thomas Carroll senior was mentally capable, it was submitted that he could give away his assets as he wished. Counsel for the defendant relied on the lack of undue influence exercised by Thomas Carroll junior and referred to Reg. (Proctor) v. Hutton [1978] N.I. 139.
36. However, this is not a case of actual undue influence being expressly exercised but is rather a case in which the relationship between the donor and donee has raised the presumption of undue influence. It is then for the defendant to rebut the presumption. The burden was described in Inche Noriah v. Shaik Allie Bin Omar [1929] AC 127 at p. 135 by Hailsham L.C.:-
“It is necessary for the donee to prove that the gift was the result of the free exercise of independent will. The most obvious way to prove this is by establishing that the gift was made after the nature and effect of the transaction had been fully explained to the donor by some independent and qualified person so completely as to satisfy the Court that the donor was acting independently of any influence from the donee and with the full appreciation of what he was doing; and in cases where there are no other circumstances this may be the only means which the donee can rebut the presumption. But the fact to be established is that stated in the judgment already cited of Cotton L.J., and if evidence is given of circumstances sufficient to establish this fact, their Lordships see no reason for disregarding them merely because they do not include independent advice from a lawyer. Nor are their Lordships prepared to lay down what advice must be received in order to satisfy the rule in cases where independent legal advice is relied upon, further than to say that it must be given with a knowledge of all relevant circumstances and must be such as a competent and honest adviser would give if acting solely in the interests of the donor.”
In Reg. (Proctor) v. Hutton [1978] N.I. 139 at p. 146, Lowry L.J. described the different approaches to the different classes of undue influence. He stated:-
“When relying on ‘express undue influence’ the plaintiff must prove that an unfair advantage has been gained by an unconscientious use of power in the form of some unfair and improper conduct, some coercion from outside, some overreaching, some form of cheating. The undue influence which is presumed in the second class of case is influence of the same kind: the difference lies in not being able to prove its exercise but, by virtue of the presumption, undue influence is deemed to have been exercised until its exercise is negatived on a balance of probabilities by evidence.”
37. It is clear that what is at issue is whether the donee has taken advantage of his position or “… been assiduous not to do so. The question can only be answered in each case by a meticulous consideration of the facts”: Hanbury, “Modern Equity” (9th ed.) p. 652.
38. I am satisfied that this is the correct approach. In this case, the presumption existing, it was then necessary to conduct a careful analysis of the facts. On the facts it was a matter of determining if the donee, Thomas Carroll junior, had taken advantage of his position or had been assiduous not to do so. This was not a case where the issue was whether Thomas Carroll junior had taken advantage of his position expressly. Rather it was a case where in the circumstances assiduous care should have been taken not to take advantage of the position of Thomas Carroll senior.
39. The learned trial judge conducted a painstaking analysis of the facts as has been set out fully in this judgment. I am satisfied that the appeal was argued on a mistaken approach to the law. The reason for the equitable law to protect Thomas Carroll senior is one of public policy – to protect a frail person. As Cotton L.J. said in Allcard v. Skinner (1887) 36 Ch. D. 145 at p. 171:-
“In the second class of cases the Court interferes, not on the ground that any wrongful act has in fact been committed by the donee, but on the ground of public policy, and to prevent the relations which existed between the parties and the influence arising therefrom being abused.”
40. Thus, the issue is whether on the facts and circumstances of the case the donee has rebutted the presumption of undue influence. The facts and circumstances of this case were fully considered and determined by the learned High Court Judge. In this case the donor was giving away practically his sole asset and the learned trial judge made careful findings of fact about the transaction.
41. The conclusions reached in Inche Noriah v. Shaik Allie Bin Omar [1929] AC 127, are analogous on the law and facts to those found by the learned trial judge. In that case Hailsham L.C., describing amongst other matters the conduct of the lawyer, Mr. James Aitken, stated at p.136:-
“In the present case their Lordships do not doubt that Mr. Aitken acted in good faith; but he seems to have received a good deal of his information from the respondent; he was not made aware of the material fact that the property which was being given away constituted practically the whole estate of the donor, and he certainly does not seem to have brought home to her mind the consequences to herself of what she was doing, or the fact that she could more prudently, and equally effectively, have benefited the donee without undue risk to herself by retaining the property in her own possession during her life and bestowing it upon him by her will. In their Lordships’ view the facts proved by the respondent are not sufficient to rebut the presumption of undue influence which is raised by the relationship proved to have been in existence between the parties; and they regard it as most important from the point of view of public policy to maintain the rule of law which has been laid down and to insist that a gift made under circumstances which give rise to the presumption must be set aside unless the donee is able to satisfy the Court of facts sufficient to rebut the presumption.”
42. The learned trial judge reached a similar conclusion on the law in this case. I am satisfied that he was correct, it was not necessary to prove specific acts of undue influence by Thomas Carroll junior. The evidence as a whole must be considered to see whether the presumption of undue influence has been rebutted. This was done most carefully by the learned trial judge. I would affirm his decision on this aspect of the appeal.
Improvidence of the transaction – decision
43. Thomas Carroll senior was disposing of practically his only asset. At the time he was frail. He did not retain any right of maintenance or support. I have already analysed the nature of the legal advice he received and affirmed the decision that it was inadequate. In all the circumstances, as described above, it is clear that Thomas Carroll senior was an unequal party. In Grealish v. Murphy [1946] I.R. 35 at p. 49-50, the High Court (Gavan-Duffy J.) stated:-
“The issue thus raised brings into play Lord Hatherley’ s cardinal principle (from which the exceptions are rare) that Equity comes to the rescue whenever the parties to a contract have not met upon equal terms, see Lord Hatherley’s judgment (dissenting on facts) in 0’Rorke v. Bolingbroke; the corollary is that the Court must inquire whether a grantor, shown to be unequal to protecting himself, has had the protection which was his due by reason of his infirmity, and the infirmity may take various forms. The deed here was in law a transaction for value: Colreavy v. Colreavy ; however tenuous the value may have proved to be in fact, and, of course, a Court must be very much slower to undo a transaction for value; but the fundamental principle to justify radical interference by the Court is the identical principle, whether value be shown or not, and the recorded examples run from gifts and voluntary settlements (including an abortive marriage settlement) to assignments for a money consideration. The principle has been applied to improvident grants, whether the particular disadvantage entailing the need for protection to the grantor were merely low station and surprise (though the grantor’s rights were fully explained): Evans v. Llewellin, or youth and inexperience: Prideaux v. Lonsdale; Everitt v. Everitt; or age and weak intellect, short of total incapacity, with no fiduciary relation and no ‘arts of inducement’ to condemn the grantee: Longmate v. Ledger; Anderson v. Elsworth. Even the exuberant or ill-considered dispositions of feckless middle-aged women have had to yield to the same principle: Phillipson v. Kerry; Wollaston v. Tribe .”
44. He also concluded at p. 51:-
“In my judgment, without any regard to any question of undue influence, upon Lord Hatherley’s principle and the concurrent authorities the plaintiff by reason of his own weakness of mind, coupled with the deficiencies in the legal advice under which he acted and his unawareness, is entitled to have the improvident indenture of settlement, dated October 24th, 1942, set aside and the Register of Freeholders rectified.”
45. Whilst one might not agree with all of the classifications recognised by Gavan-Duffy J. the legal principle is stated clearly and is applicable to this case.
46. In light of the evidence, of the omissions in relation to the legal advice given, the fact that there was no evidence that the transfer was read over to Thomas Carroll senior, his frail health, his lack of practically any other assets, his relationship with his daughters and all the circumstances, there was clear evidence upon which the learned trial judge could come to the determination, which he did, at p. 232, that:-
“This in my view is a clear case where the equitable jurisdiction can and should be invoked with a view to setting aside the transaction on the grounds of its improvidence.”
47. I would affirm his conclusion.
Acquiescence laches – decision
48. I am satisfied there are no grounds raised upon which the appeal on this point could succeed. On the evidence the plaintiffs learnt of the transfer, obtained a copy thereof and issued proceedings all well within one year. I am satisfied that the learned trial judge was correct in his conclusion that there was no acquiescence by the plaintiffs. Consequently, I would dismiss the appeal on this ground also.
Conclusion
49. I affirm the judgment and order of the High Court that the deed of the 3rd May, 1990, should be set aside.
Lynch J.
50. I agree with the judgment of Denham J. and also with that to be delivered by Barron J.
Barron J.
51. I agree with the judgment delivered by Denham J. I would, however, like to deal with the issue of undue influence.
52. These were proceedings to set aside a voluntary conveyance from Thomas Carroll senior to his son Thomas Carroll junior dated the 3rd May, 1990, whereby Thomas Carroll senior transferred to his son his licensed premises with living accommodation situate at Burke Street, Fethard, Co. Tipperary.
53. These premises had been purchased by Thomas Carroll senior in the year 1960. Thereafter they had comprised also the family home. The business was run by his wife, Sadie. They had three children. The first plaintiff was the eldest having been born in 1962. Next came Thomas Carroll junior born in 1964, and the youngest was the second plaintiff born in 1968. Until 1974, Sadie Carroll ran the business with the help of a part-time barman. From 1974 there was a full-time barman. Unfortunately, Sadie Carroll died in June, 1989. At that stage her husband was aged 78. He had never been seriously involved in the running of the business. After his wife’s death the second plaintiff stayed for six months helping to run the premises. When she left to take up a job in Dublin there was no one to run the business.
54. Thomas Carroll junior was willing to take over the running of the business. However, he was basically a farmer and was involved in looking after farms for two of his uncles. Nevertheless he was anxious that his father should make arrangements for him to take over the running of the business. Although the second plaintiff had gone to live in Dublin early in 1990, both she and her sister had always helped at weekends in the premises.
55. Thomas Carroll senior executed a conveyance of the licensed premises to his son dated the 3rd May, 1990, reserving to himself a right of residence in the premises. Thereafter the licensed premises continued to be run as before with the plaintiffs coming down at weekends and helping to run the business. Thomas Carroll junior married in September, 1993. Unfortunately, he was killed in a motor accident on the 17th January, 1994. Some weeks after the plaintiffs learned for the first time that the document which had been executed in May, 1990, was not as they had thought an arrangement whereby Thomas Carroll junior was entitled to run the business but in fact a conveyance of the entire property. They were surprised by this since it was a very close knit family and their father had never told them that this is what he had done. On the contrary he had always assured them both before and after the execution of the transfer that they always had a home in the premises. The plaintiffs consulted a solicitor and ultimately the present proceedings were instituted in December, 1994.
56. As found by the learned trial judge the circumstances in which the conveyance came to be executed were as follows. Thomas Carroll junior was anxious that some arrangement should be come to with his father whereby he should run the business. He contacted Philip Joyce, a local solicitor, who was not in fact the family solicitor and told him of the proposed arrangement. Mr. Joyce went to see Thomas Carroll senior and obtained instructions from him. These instructions were to transfer the entire premises to his son. There was some doubt as to whether he wanted to reserve a right of residence only or a right of residence coupled with a right of maintenance. In the event Mr. Joyce was informed by Thomas Carroll junior that his father wanted a right of residence only. Mr. Joyce then had two deeds engrossed, one reserving a right of residence, the other a right of residence and a right of maintenance, and went to see Thomas Carroll senior. Thomas senior said that he wanted only a right of residence and accordingly, the deed reserving this right only was executed by him. In both meetings the amount of time which Mr. Joyce spent with Thomas Carroll senior was approximately half an hour not all of which was devoted to the transaction in hand.
57. The case made to set aside the deed was that Mr. Joyce was unaware of what assets Thomas Carroll senior had nor was he aware of the family relationships. The evidence was also clear that the donor was old and infirm and devastated by the recent death of his wife. She had been some 25 years his junior. It was submitted that the presumption of undue influence arose and that there was no independent legal advice nor any independent advice of any sort given to Thomas Carroll senior. It was also contended that the transaction was an improvident one since it transferred the entire of his estate without reserving to himself the means of living.
58. The case for the defendant who is the widow of Thomas Carroll junior was to the effect that Thomas Carroll senior was of sound mind and knew very well what he was doing. It was also submitted that he had available to him the independent legal advice of Mr. Joyce, further since the plaintiffs did not allege improper conduct on the part of Thomas Carroll junior this rebutted the presumption of undue influence. In relation to the plea that the gift was improvident it was submitted that he had alternative assets and that Thomas Carroll junior provided consideration in that he took over the liabilities of the business.
59. The High Court (Shanley J.) before whom the matter came found for the plaintiffs on both grounds. As against this judgment the defendant has appealed. The essential grounds of appeal as set out on the notice of appeal are:-
(1) the clarity and independence of mind of the donor;
(2) the availability of independent legal advice; and
(3) the admission on behalf of the plaintiffs that Thomas
60. Carroll junior had not exerted undue influence on his father.
61. At the hearing of the appeal counsel on behalf of the defendant accepted that the presumption of undue influence applied, but sought to rebut this by the admission by the plaintiffs that no improper influence had been exercised by their brother over their father. He relied in the main on the Northern Ireland case of Reg. (Proctor) v . Hutton [1979] N. I. 139.
62. In that case the donor was the aunt of the donee. The aunt was aged 85 and had been living alone in Philadelphia. The niece brought her aunt home to live with her as one of the family. Unfortunately, her aunt died within a few weeks. Before her death she had opened a bank account in the joint names of herself and her niece, the money in the account to be payable to “either or survivor”. The administrator of the aunt’s estate contested the right of the niece to the monies in the account. In the course of the proceedings, the question arose whether the presumption of undue influence arose and, if so, whether it had been rebutted. Dealing with this presumption Lowry L.C.J. said at p. 148:-
“But rebuttable presumptions are rules of evidence. They arise only when the facts are not sufficiently known and operate only until the facts become known.”
63. In the actual case he was satisfied that all the facts were known and that the gift should not be set aside. The relevant facts as found were and are referred to in the judgment of Lowry L.C.J., at p. 145, as:-
“From her demeanour and from the way in which she gave her evidence I formed the view that Mrs. Proctor [the niece] was a truthful and reliable witness, and on the basis of her own evidence. I formed the view that when she went out to bring her aunt home from Philadelphia and when she gave her a home in Portadown, she was not concerned about what money her aunt might have or about what money she might receive from her aunt. I also formed the view that Mrs. Proctor is a kind, warm-hearted person, who went out to America and brought her aunt home out of feelings of kindness and sympathy for a lonely old lady, and not by reason of hope or desire of receiving or extracting a financial reward or benefit from her aunt.”
64. Having regard to the facts, Lowry L.C.J. said at p. 149:-
“But proof of adequate independent advice is merely one way of establishing that the gift was ‘the spontaneous act of the donor acting under circumstances which enabled him to exercise an independent will,’ and on the rare occasions (such as the present) when it can be done, the simple and conclusive thing is to prove positively that the donee exercised no influence. When this proof is forthcoming (as in this case) pari passu with the evidence which is said to prove the relationship of trust and confidence, it is more accurate to say that the presumption never arises rather than to say that it has been rebutted.”
65. I would agree that once the full facts are known, it is a matter for the court to determine whether there was or was not undue influence. In such case, the presumption really plays no part.
66. In reaching his conclusions Lowry L.C.J. was influenced by the decision of the English Court of Appeal in In re Brocklehurst’s Estate [1977] 3 W.L.R. 696. That was an unusual case on the facts. The owner of a large estate, who on the evidence was reluctant to benefit his nearest relation, leased the shooting rights over the estate to a garage proprietor in a totally different social position from that of the testator which had the effect of seriously depreciating its value. The court was satisfied from the evidence that the testator had intended to do what he did, probably as a halfway house between giving his relative the entire estate and none of it. Accordingly, it was held that although on the facts a presumption of undue influence might well have arisen, the court was satisfied that the disposition was the free exercise of an independent will of the testator. At p. 152 Lowry L.C.J. referring to In re Brocklehurst’s Estate says:-
“At p. 43E the Lord Justice draws attention to a feature with which the facts of this case have something in common and which, I suggest, conduces to a similar result: I refer to the availability, as opposed to the paucity, of evidence on the relevant issue. While the facts of the two cases are completely different, Re Brocklehurst furnishes a most useful reminder of the role played by the actual evidence.
Remembering that presumed undue influence conveys the notion of the undue influence which is alleged to arise from the relationship being actually exercised, even if not proved, it must, in order to count, be capable of affecting the relevant transaction. All the evidence points away from that possibility in the present case. And if the exercise of undue influence is negatived by evidence which is believed, there can be no presumption in favour of the donor or those claiming through her.”
67. These two cases decide essentially that when all the facts are known surrounding the execution of the impugned document and these show that the donee exercised no influence over the donor then there is no ground to set the deed aside.
68. In the ordinary way, the person seeking to set aside a voluntary deed does not know all the circumstances surrounding the execution of the document. Accordingly, where the relationship between the donor and donee suggests that the deed might have been procured by undue influence, a presumption arises and the onus of rebutting it is placed upon the donee.
69. As Bridge L.J. said in In re Brocklehurst’s Estate [1977] 3 W.L.R. 696 at p. 718:-
“… the presumption of undue influence, like other presumptions, is a tool of the lawyer’s trade whose function it is to enable him to arrive at a just result by bridging a gap in the evidence at a point where, in the nature of the case, evidence is difficult or impossible to come by.”
70. What has to be shown is that “the gift was the spontaneous act of the donor acting under circumstances which enabled him to exercise an independent will and which justifies the Court in holding that the gift was the result of a free exercise of the donor’s will.” See the judgment of Cotton L.J. in Allcard v. Skinner (1887) 36 Ch. D. 145 at page 171.
71. There is no one way in which the presumption may be rebutted. The usual way is to show that the donor had advice from someone who was independent and who was aware of all the relevant circumstances. But as can be seen from Reg. (Proctor) v. Hutton [1978] N.I. 139, it is equally good to show that all the relevant facts are before the court and that these show that the donor was not in any way influenced in what he did by the donee. The presumption is important when all the facts are not known. It cannot be rebutted until all the gaps in the evidence are filled and the evidence then denies the existence of any undue influence.
72. The present case is easily distinguished from Reg. (Proctor) v. Hutton [1978] N.I. 139, upon which counsel for the defendant relies. In the present case the donee was instrumental in instructing the solicitor who prepared the document and was present when it was executed. He told the solicitor what his father wanted. The evidence also shows that the latter did not realise what he had done since he continued to tell the plaintiffs that there would always be a home for them in the premises. This evidence leaves a clear doubt as to whether the donor knew what he was doing and also as to what was his real intention.
73. It is important to realise that a presumption is a rule of evidence which shifts the burden of proof, and where the real intention of the testator cannot be determined the onus has not been discharged.
74. In the present case, the defendant relies essentially on three matters. The first is that the plaintiffs accept that their brother did not do anything improper. That alone is insufficient. As I have already indicated the evidence does not show clearly why the donor did what he did, that he knew what he was doing, and that it was the free exercise of his will.
75. The next basis upon which the defendant relies is the clarity and independence of mind of the donor. That may well be so, but it has no bearing on this case since it is not necessary to establish undue influence to establish that the donor was not mentally alert.
76. The final ground upon which the defendant relies is that the donor received independent legal advice from Mr. Joyce. The question of advice by a solicitor was considered by the High Court (Budd J.) in Gregg v. Kidd [1956] I.R. 183. At pp. 201 and 202, Budd J. approved certain principles from the judgment of Farwell J. in Powell v. Powell [1900] 1 CH 243 .These were:-
(1) a solicitor who acts for both parties cannot be
independent of the donee in fact; and
(2) to satisfy the court that the donor was acting
independently of any influence from the donee and with the full appreciation of what he was doing it should be established that the gift was made after the nature and effect of the transaction had been fully explained to the donor by some independent and qualified person. Further, the advice must be given with a knowledge of all relevant circumstances and must be such as a competent advisor would give if acting solely in the interests of the donor.
77. Accepting these principles, there can have been no independent advice given by Mr. Joyce since at best he was acting for both parties. In any event his evidence was lacking in two important respects:-
(1) he did not have knowledge of all the relevant
circumstances; and
(2) he did not give advice, he merely set out to carry out
the donor’s instructions.
78. Even if he had been the donor’s solicitor what he did would not have saved the transaction. As I have said before, a solicitor or other professional person does not fulfil his obligation to his client or patient by simply doing what he is asked or instructed to do. He owes such person a duty to exercise his professional skill and judgment and he does not fulfil that duty by blithely following instructions without stopping to consider whether to do so is appropriate. Having done so, he must then give advice as to whether or not what is required of him is proper. Here his duty was to advise the donor to obtain independent advice.
79. In the present case whatever independence Mr. Joyce may have had has been destroyed by his acting in the present proceedings as solicitor to the personal representative of the donee.
80. In my view this was a case in which the presumption of undue influence arose to transfer the onus to the defendant, an onus which has not been discharged.
Elliot & Anor v Stamp & Anor
[2006] IEHC 336
Judgment of Mr. Justice Roderick Murphy delivered on the 7th day of November 2006.
1. Nature of Claim
The plaintiffs are the sister and nephew of Nicholas Roche, deceased (the Deceased). The second named plaintiff, the son of the first named plaintiff, pursuant to a power of attorney granted on 6th April 2004, acts on her behalf. The court acceded to an application amending the pleadings to reflect the position of the second named plaintiff.
Proceedings began by way of summons dated 13th July 2004, wherein the plaintiff claimed an order refusing probate of “the pretended will” purportedly executed on or about 20th February 2003; a declaration that the said will was not validly executed; that the testator was not of sound disposing mind and, in the alternative, a declaration that the will was procured by acts of undue influence brought to bear upon the Deceased by the defendants.
The first named defendant is the principal beneficiary and was appointed sole executor under the purported will. The second named defendant is his mother and the sister of the Deceased.
The Deceased, late of Ballyvalden, Blackwater, Co. Wexford, died a bachelor without issue on or about 3rd May, 2003. His assets include a residential farm, credit union deposits and cash.
Certain particulars were given in the statement of claim regarding alleged dominion and control, and the involvement of the defendants, and in particular the first named defendant in the procuring of a solicitor for the purposes of preparing and executing the will which, the particulars continued, was not the product of the free and voluntary act of the Deceased but rather was the result of requests and/or demands made of the Deceased by the defendants and either of them. It was further stated that the Deceased was in fear of not complying with the said requests.
The undated Defence denied that the will was a pretended will, was void. The act was a free act of the testator who made the will with full capacity, competence and understanding. The Deceased testator independently drew up his will over a two day period between 19th and 20th February with the advice and assistance of a solicitor, and without any interference, duress, or influence, undue or otherwise. The Deceased was of sound disposing mind at the date of the execution of the will which was drawn up in accordance with the provisions of the Succession Act 1965 (the Act). The will contained many and numerous legacies and bequests in accordance with the testator’s detailed instructions to his solicitor.
By Reply delivered 31st May 2005, issue was joined. It was denied that the pretended will was the free act of the testator or that he made the will with full capacity, competence and understanding. It was further denied that he drew up his pretended will independently with the advice and assurance of a solicitor and without any interference, duress or influence. Particulars were given that the first named defendant (inadvertently referred to as the second named defendant in the reply) was actively involved in the procuring of the execution of the said will and repeatedly liaised with the solicitor drafting same, both in relation to its drafting up and its execution. He gave information to the instructing solicitor in relation to the tax advantage of the disposition of the Deceased’s farm.
By way of special reply the plaintiffs put the defendants on strict proof that the Deceased was of sound disposing mind on the date of the execution of the will and that the will was drawn up in accordance with the provisions of the Act. It was denied that the will contained many and/or numerous legacies and bequests in accordance with the testator’s detailed instructions.
Notice for particulars were raised and replied to but do not appear to have furthered the matter significantly.
2. Motion to Strike out Proceedings
By notice of motion dated 30th January 2006, the defendants applied for an order striking out the plaintiffs’ claim for failure to comply with a request for further particulars and on the grounds that the plaintiffs’ claim disclosed no reasonable cause of action etc., there being no evidence to support the plaintiffs’ claim of undue influence on the testator and the plaintiffs’ having failed to provide same in the replies to particulars. The motion was grounded on the affidavit of the first named defendant exhibiting medical reports. The second named plaintiff, referring to his appointment as attorney of the first named plaintiff, denied responding to the particulars and said that the pretended will was prepared by a non-legally qualified person, was procured in haste and that the statement of claim and reply raised the following issues as valid grounds for challenging the will –
Issues of:
the due execution of the will;
lack of capacity; and
undue influence.
There were further affidavits from Dick Parle, a beneficiary under the will and neighbour and friend of the Deceased; of Mrs. Bridie Stamp, the second named defendant and of Tom Murphy, legal executive in the firm of M.J. O’Connor & Company as to his role in taking instructions, drafting and witnessing the will when executed.
By consent order made by Quirke J. on 23rd June 2006, it was ordered that the application be refused and that the costs of the motion be reserved to the hearing of the action.
The court directed that the issues to be determined were as follows:
1. Whether will was executed in accordance with provisions of the Succession Act 1965;
2. Whether testator Nicholas Roche was of sound disposing mind; and
3. Whether will was procured by duress or influence of the defendants or either of them.
3. Evidence on behalf of the Plaintiff
The court has carefully considered the oral evidence of the following nine witnesses:
3.1 Anastasia Elliot: evidence on commission
The plaintiff gave evidence and commission before Mr. Hugh Byrne, B.L. on 26th September 2006, in the Royal Hospital in Donnybrook. Mrs. Elliot, the plaintiff, is aged eighty one, a widow with six boys. The Deceased was the youngest and was her only brother. He stayed on the family farm. She had been, on occasions, in the 1970s at the farm tidying, cooking and paying bills. The testator was not good at school and could not read. She did not see him when he was with her sister Bridie, the second named defendant.
When she was in the Royal Hospital in Donnybrook, she could not go down but she knew he had made a will when he died. He did not like anything about wills and was thinking of getting married.
Her boys used to go down in summer and were always there helping. There were others there, but not as much as her boys. Her brother was very quiet and simple. She doubted he would have understood. He could be bullied, if afraid and was not strong willed. While he was slow on the uptake she imagined that he was all right in his head.
She said the last time she had been down on the farm was in the 1970s when she used to go down once a week but she had not seen him for a long time.
Her brother rang her not long before he died, he was in good form and never complained about his health.
She said that she wanted to start this case.
3.2 Evidence of David Elliot
David Elliot, the attorney of the plaintiff and nephew of the testator, had visited his uncle in September 2002, and noted that he had deteriorated from his visits from two years previously. He had severe arthritis and looked as if he were dying. He was shocked that he would have made a will. He was aware that his uncle had sold a site and used a solicitor but did not know who it was at some time previously. He was of the opinion that he would be vulnerable and believed that the first named defendant had influenced him while he lived with the second named defendant from Christmas 2002, until he went into hospital on 21st February, the day after he made the will. It was not the will his uncle would have made – he would not have known the Folio number of his farm.
In cross-examination he agreed that the first named defendant resided close to his uncle. He did not know the extent to which the defendants had assisted the Deceased. He agreed that his mother, the first named plaintiff had gone to live with the second named defendant for twelve to fourteen months after her husband died and before she got a stroke and then stayed for two weeks with him, before she eventually went into the Royal Hospital in Donnybrook, Dublin.
He agreed that his uncle went to Wexford Hospital on 21st of February 2003, and thereafter to St. John’s Nursing Home. He returned to his own house on 7th April 2003, expecting home help which did not materialise until shortly before he agreed to go to Lawson Nursing Home on 25th April 2003.
He said the Deceased would not have made a will. He could not read nor write though he could sign his name. The witness said that he was suspicious that Mr. Murphy, the legal executive, and Robert Stamp, the first named defendant had gone together to make the will. He said that this was not his uncle’s (the Deceased’s) will.
He did not see his uncle after he had made the will.
He agreed that following the testator’s death on 3rd May 2003, he entered a caveat on 21st August of that year and was granted a Power of Attorney from his mother on 6th April 2004.
3.3 Evidence of Mary Roche
Mary Roche, the sister of Anastasia, and Bridie, and unmarried sister of the Deceased, had told the court that her father had died in 1950 and her mother in 1970. In 1974 her sister Madeline had died. There were four surviving children including the Deceased, herself and the plaintiff and the second named defendant.
She described her brother as not being well off, quiet, dyslexic and not being good on the land. She was told by her sister Bridie (the second named defendant) that he had made a will in February, and she did not think any more about it. She had not discussed it with him. She had visited him, but not very often. When she did, he was not too bad, sitting by the fire, but kept getting worse. She was told that after he had made the will he went to hospital. He had made a great – a tremendous – recovery and went for physiotherapy – he had made a good recovery. He then went to Lawson Nursing Home and died shortly afterwards. It was very sad.
He had been close with all (of his sisters) but closer to the first named plaintiff.
She did not believe that he could make a detailed will as he could not read or write.
In cross-examination she said she did not remember signing anything in 1993 when the farm was put in her brother’s name. She said she had objected so that her brother would be safeguarded and that someone else would not get the deed. She had not signed anything. He owned the farm, but she had cleared the debt on the farm.
She again referred to her brother having been brought to physiotherapy by her nephew, the second named defendant, and having made a good recovery. Robert, the second named defendant, had brought him for physiotherapy and had also brought her to see her sister Anastasia in Dublin.
3.4 Evidence of Niall Elliot
Mr. Elliot, an older son of Anastasia has lived in Toronto since 1990. He met his uncle on 7th October 2002, having been in Ireland two years before that.
He remembers always having been with his uncle holidaying on the Deceased’s farm over the summer before he went abroad and taking part in farm duties. He had an interest in old vintage buses and rent was being paid to his uncle for keeping them in an old caravan park near his uncle’s house.
The Deceased could neither read nor write but was young at heart. He saw him for three weeks in September/October 2002 on the farm and noted that he had deteriorated. When he was home he stayed in Enniskerry. He vaguely remembered the farm being changed to his uncle’s name and remembered his uncle asking him where to put money. He recommended the credit union, but did not know what money his uncle had.
If his uncle had made a will, his farm would have gone to his three sisters. He was very fair. Robert Stamp, the first named defendant, had contacted him regarding the vehicles remaining on the Deceased’s property.
He was not at his uncle’s funeral. He denied that he was well founded as was indicated in the instructions taken by Mr. Murphy, the legal executive.
In cross-examination he referred to his uncle being registered as the owner of the farm on 11th March 1993. His uncle would not have necessarily wanted a young male to succeed him. He denied ringing Robert, the first named defendant, in February 2003, to ask if his uncle had made a will.
He agreed that he was in Canada, that David his brother lived in Dublin, while Robert Stamp lived nearby.
4. Evidence of the Defendants
4.1 Tom Murphy
Mr. Murphy, a legal executive was employed by M.J. O’Connor, solicitors of Waterford and Wexford for thirty seven years and was the senior legal executive there with responsibility for conveyancing and wills. That firm had seven partners, several solicitors and legal executives. A qualified solicitor dealt with administration.
He had ascertained from the records of his office that Nicholas Roche, the Deceased, was a client of the firm from November 1992 and that he had dealings with regard to the granting of a right of way on the farm having previously dealt with wayleaves and the sale of a site. In 1992 he became the registered owner of Folio 6773 by way of a s. 49 application. In September, 2002 Mr. Roche had instructed him with regard to a wayleave over the land and further instructed him that this was not to affect his right to apply for planning permission.
On Monday, 17th February 2003, his office was phoned by Robert Stamp, the first named defendant, and the call was transferred to him, requesting him to attend at Mr. Stamp’s mother’s residence to take instructions from Mr. Roche.
On Wednesday, 19th he attended on Mr. Roche in the afternoon and interviewed him while he was sitting in the parlour. There was no one else present, though the first and second named defendants were in the house, having brought him in to meet Mr. Roche. He attended with him for some one and a half to two hours. Mr. Roche seemed very clear minded and gave him details of family members, of assets and of his wishes. He had already details of Folio 6773. Mr. Roche gave him details of cash he held and was fully aware of his assets. He did not have any paper with him. His instructions “came from his head”.
The instructions were used to draft a will and he had said that it would take a day or two and he would come back. However the next day, 20th February 2002, Mr. Stamp rang him to say that Mr. Roche had got a bed in hospital for which he had been waiting and asked if Mr. Murphy could come that day. Mr. Murphy said in evidence that he preferred to see clients at home. He found Mr. Roche in the parlour on his own. He read the will over to him carefully. He raised the issue of tax on the farm bequest and asked for permission to discuss the matter with Mr. Stamp. Mr. Roche agreed. Afterwards Mr. Murphy asked Mr. Stamp to leave the room and continued with Mr. Roche. No changes were made to the will nor did Mr. Stamp get any other benefit.
Mr. Murphy’s wife, who also gave evidence, had come with him and was brought in from the waiting car to witness Mr. Roche’s signature after her husband had witnessed it.
Under cross-examination, Mr. Murphy agreed that there were some discrepancies between the instructions and the drafting of the will. It was the residue that was made subject to the death and funeral expenses rather than the bequest of the farm to the first named defendant as per the instructions. Mr. Murphy did not explain to the testator that this change had been made. Moreover, a provision for abatement in the event that the estate not having sufficient funds to pay the pecuniary legacies was not included. Mr. Murphy was agreed that the wording of references to the Stamp family differed from those to the Elliot’s.
Mr. Murphy also agreed that the will had been drafted by him. No other solicitor in his firm had dealt with it. He understood there was an urgency as the testator had been scheduled to go to hospital. In his opinion there was no need for any medical examination as the testator was in his own environment and was clear minded.
He also agreed that Mr. Robert Stamp was an accountant and as such had a relationship with the firm M.J. O’Connor.
He agreed that Robert Stamp had been told of the bequest and the implications for tax before the will was executed. Mr. Murphy agreed that Mr. Stamp had played a significant role in notifying Mr. Murphy of Mr. Roche’s desire to make a will.
4.2 The court also heard the evidence of Mrs. Mary Murphy, the other attesting witness, who said that she found Mr. Roche sitting in his chair quite bright and smiling and she saw him signing, a little shakily, and then Mr. Murphy signed and she signed and they had no other dealings with Mr Roche.
4.3 Evidence of Bridie Stamp
Mrs. Stamp, the second named defendant, referred to her brother as a quiet, retiring person with whom she had a good relationship. Over the years he used to stay overnight with her on occasions. He stayed with her from Christmas until February 2003.
She referred to her five children and to Robert, the first named plaintiff, helping her brother. She referred to the plaintiff staying with her for four months, three and a half years ago, before she went to the Royal Hospital. There was a good relationship between them and they had no dispute.
When the Deceased had stayed with her at Christmas 2002, he had developed a pain and Robert brought him to a new doctor. They were told that his arthritis could be fatal. He stayed for about seven weeks until 21st February. The witness herself had an operation on 19th March and afterwards she went to her daughter Elizabeth for three weeks to convalesce.
She remembered Tom Murphy, legal executive, coming to the home. She had previously told her brother that he should fix up his affairs but had no conversation with him before Mr. Murphy came. She did not know of his plans. Anna, her daughter and Robert’s sister, helped her washing clothes and bed linen for her brother. Her brother needed lifting, which was done by Robert.
When he came out of hospital he was in good form. He was quite clever despite lack of schooling. He was intelligent and there was no drawback in relation to his business. No one discussed his affairs, or ever forced him. It was no surprise to her that the legal executive came. She did not know that he would leave the farm to Robert, but had expected it.
In cross-examination, she agreed that her younger son, Nicholas, was a farmer. Robert would help her brother in anything he could. She agreed that Robert was on many occasions alone with her brother. Robert may have helped to dress him. Before the Deceased came to them for Christmas he did his own shopping. Afterwards she looked after him.
4.4 Evidence of neighbours
4.4.1 Mr. Aidan Murphy, bachelor, neighbour and friend used to visit the Deceased every Thursday; saw him a month before he went to hospital and noted that he did not like hospital or doctors and had put it off.
Before that, the Deceased came every Thursday night to his home. After he returned from hospital Mr. Murphy visited him three weeks before he died.
He noted that Robert, the first named defendant, was his favourite nephew: he always spoke of Robert, though Mr. Murphy did not know him. He knew his brother Jim alright. He did not see anything wrong with what the Deceased was doing with his farm and agreed that he was competent. Nobody would bully him. He got opinions from others before he acted.
When he saw him three weeks before he died he said that he had fixed his affairs and gave him €50, Mr. Murphy said that “there were no flies on him” and he replied that “if there were, they were all dead ones”. He missed him terribly.
In cross-examination he said that nobody had asked him to give evidence before he got the solicitor’s letter requesting that he attend on 5th October 2006.
4.4.2 Mr. Richard Parle
Mr. Parle was a friend and neighbour and a widower and had received a bequest in the will. He regarded the Deceased as gentle and honest with great memory. He used to come down to his place on Mondays. He saw him when he came back from St. John’s in February, when he went to the Deceased’s home. The Deceased was not very good and was complaining of pains in his hands. Mentally he was very clear and wanted to know what was going on. He saw him the day before he died and he was very good – much better – sitting in the day room of the nursing home in a chair. He was able to get up. The witness was surprised that he had died the following day. He said that he was not bullied, he did what he wanted to do. He had met Robert Stamp when they were testing cattle with the Deceased’s sister Mary and he also knew the Deceased’s sister Anastasia and his nephew Jim Stamp.
In cross-examination he said he did not know the Elliot family as he had been working in the United Kingdom and he was only back from 1994 onwards.
4.5 Evidence of Robert Stamp
Mr. Stamp, an accountant, the son of Bridie, the second named defendant married with three children, all boys. From 1987 he saw a lot of his uncle in relation to cattle, reading his post and paying his bills. Since 1992 he saw him on every Wednesday and Friday night and the Deceased relied on him. He also helped Mary Roche bringing in the hay. He drove the Deceased and his aunts to see the plaintiff in the Royal Hospital every second Sunday.
On Christmas night 2002, he was not well. His doctor had him on painkillers and he told the witness that he would like to change doctors. Mr. Stamp arranged that he meet Dr. Curtis on 3rd January 2003. He was referred to Wexford Hospital for x-rays.
He stayed with his mother, the second named defendant until Dr. Curtin got him to Wexford Hospital under Dr. Riordan, consultant. He had previously stayed with the witness’s mother for a month in 2001, while the witness looked after his stock, and dogs and cats.
On Sunday evening 16th February 2002, he said he wanted to get a solicitor out. The following day the witness contacted M.J. O’Connor’s. Mr. Murphy came out that evening (17th February).
On Wednesday 19th February, he had asked Mr. Murphy to come as his uncle had got a bed in Wexford Hospital for the following day. He came out at dinner time to dress his uncle and to prepare him for the visit with Mr. Murphy. He was not present when his uncle was with Mr. Murphy. He did not know who was going to get what other than Mr. Murphy had told him that his uncle wished to leave him land and expressed a concern about tax. He did not tell anyone. On Friday 21st February, he took him into hospital at 2.00 pm. He said that he never raised his voice to his uncle nor did not pressurise him. He was in hospital for a short time and then came home for approximately three weeks and was to have had home-help, which did not materialise until three days before he went into care.
During that period he brought him to have physiotherapy in St. John’s.
During that period friends visited him – he did not visit anyone. A friend, Jim Casey, suggested a nursing home. The witness rang six, and his uncle agreed and was happy with moving into Lawson Nursing Home which was the cheapest. On Friday 5th April, he settled in remarkably and was a good patient and happy. The witness visited him every night in Lawson. On Friday 2nd May, he had not seen him so well. He was joking, chatty and relaxed. He died the following day.
He said that Niall Elliot, his cousin had telephoned him from Canada on 5th April 2003, to ask if his uncle had made a will.
He said he was surprised on the day that he had got the farm. His uncle had never indicated one iota to whom he would give the farm. He found out after his death that the Deceased had gated a right of way to Jim Casey.
When he left for hospital, his uncle, the Deceased, had asked him to take the cash which was in jam jars in the house and put it into his car for safe keeping.
On cross-examination he said that it had occurred at his uncle’s request. That is what happened, it was not businesslike. His uncle was a quiet and simple, retiring man. He agreed that such people are susceptible to suggestions, but that his uncle was his own man. He acknowledged that his uncle had agreed with him to go to Dr. Curtis. He had quite a degree of contact with him, he helped to dress him during the six week period in his mother’s house, but acknowledged that his mother had said that her brother was capable of dressing himself.
He agreed that when he chose the nursing home that the witness knew that he was a beneficiary. However he said that the deciding factor for his uncle was that it was cheaper.
He said he did contact Mr. Murphy with regard to the will. He agreed that the Deceased was then dependent. His sister Anna lived nearby. He agreed that his uncle made his will after the diagnosis of the illness being fatal.
He said that his uncle had asked for Mr. Murphy, he did know whether he was a solicitor or not.
He said that when it was he knew that the Deceased was going into hospital that his mother asked him to ring Mr. Murphy. He said that he was there before and after Mr. Murphy’s visit and was surprised that (the first visit) lasted a couple of hours. He did not supply any information to his uncle.
His aunts had been very good to his uncle, paying his debts, helping with the harvest and looking after him, even though they were much older than he was.
He agreed that his aunt Anastasia Elliot, the plaintiff, was entitled to enquire into the circumstances of the will and to deal with it with suspicion. There was no correlation between his uncle’s intelligence and his illiteracy.
He had initiated the motion to strike out for want of replies to particulars. As far as he was concerned the will was a valid one, drafted by a firm of solicitors. He agreed that one could have influence over another without raising one’s voice. However he did not pressurise his uncle. He did not develop a very close relationship such as to cause a dependency.
5. Decision of the Court
He agreed that he played a significant role in the will coming into being and that he knew of the benefit before the will was executed.
The court finds that Mr. Stamp gave honest answers, on occasions against his own interest; and did spend considerable time looking after his uncle personally and with regard to his affairs. In the circumstances it seems to the court that the role played with regard to the contacting of the solicitors and in particular the legal executive, Mr. Murphy, was at the behest of the testator. Whatever the views of the testator’s sister with regard to him not countenancing the making of a will, it is clear that due to the circumstances of his illness and, indeed, dependency on his sister, the second named defendant, and on the diagnosis of Dr. Curtis and, indeed, the promptings of his sister in that regard, that the Deceased did decide, without undue or any pressure, to ask Mr. Stamp to arrange that Mr. Murphy visit him for the purpose of instructions.
Having regard to the exhibits in Mr. Murphy’s affidavit of the instructions given, it seems to this court that, other than supplying the Folio number of his farm that the information emanated from the testator and that the detailed instructions were well reasoned and demonstrated a clear testamentary capacity particularly in the light of the evidence given by Mr. Murphy and Mrs. Murphy as attesting witnesses.
It seems to me that the discrepancies – particularly that of the debts and funeral expenses being deducted from the bequest of the farm which is not reflected in the will which had the most deductions from the residue, do not invalidate the will. I have particular regard to the decision of Mitchell v. Gard (33 L.J. p. 7, referred to in Jarman on Wills, (1951) 8th Ed. at 31) where the residuary legatee, who prepared the will, intentionally omitted some legacies to which he had been directed to insert, and the omission was not noted by the testatrix: it was held that the will was nevertheless valid. Probably in such a case the residuary legatee would be held to be a trustee for the disappointed legatees.
In this particular case there was no admission of legacies but rather apparent discrepancies between the instructions, noted by Mr. Murphy on 17th February 2003, and the text of the will executed on 20th February.
I have also considered the apparent discrepancy between the abatement in the event of insufficient assets. Clearly this does not arise and, to a certain extent, can be taken together with the first apparent discrepancy. I have been subject to the actual wording of the will.
The relationship between the first named defendant, as accountant, and M.J. O’Connor, solicitors for the Deceased, was fully acknowledged by Mr. Tom Murphy. The Court has not heard any evidence nor has there been any credible suggestion that such relationship constituted undue influence. The choice of the Deceased was to have M.J. O’Connor draft his will. He had dealt with Mr. Tom Murphy previously. Mr. Murphy had extensive experience in the drafting of testamentary dispositions.
In relation to that will I am satisfied that it was read over to the testator; that there had been no changes as a result of the meeting with Mr. Robert Stamp; that the testator was capable of knowing and did know of the contents of the will and approved of the same by virtue of his signature which was attested to by both Mr. and Mrs. Murphy.
It seems to me that the will did correspond with the provisions of the Succession Act 1965.
It does not seem to me that there was any evidence, notwithstanding the dependency of the Deceased upon the defendants that he was under their dominion and control.
There is ample evidence of the involvement of the defendants in the care of their brother and uncle. The second named defendant looked after him especially from Christmas, 2002 to his hospitalisation on February 21st. The first named defendant looked after his cattle, post and bills from 1987 onwards and saw him every Wednesday and Friday. The second named plaintiff agreed that he did not know the extent of such assistance.
Notwithstanding that the Deceased had little schooling, it is clear that, while being a simple person, he was honest and intelligent in the running of his own affairs. I have no doubt from the evidence of those who were closest to him, both family and friends that he was his own man, not susceptible to pressure or dominion. The second named defendant, his sister who knew him well having lived closest and who was with him in his last few months believed him to have had little schooling but quite clever. Mr. Parle, his neighbour and friend believed him to be mentally very clear. Aidan Murphy said he told him at their last meeting that “there were no flies” on him. No one would bully him. He gave detailed instructions in relation to his assets and in relation to beneficiaries. He may not, indeed, have known the extent of cash assets which, rather carelessly, he had left in his home and had asked his nephew to put in his car for safekeeping. There is no suggestion that his nephew, in gathering up and accounting for that money, has been in any way unprofessional. He followed the directions given by his uncle with regard to his safekeeping even if, understandably, he had regarded as being imprudent to have left it in the car.
Accordingly, the court will find that the will was executed in accordance with the provisions of the Succession Act 1965. While the second question, whether the testator was of sound disposing mind, was not pursued by the plaintiffs, nor indeed was there any necessity to call either Dr. Curtis nor Dr. Riordan, the court should confirm that the allegations that the Deceased was not of sound disposing mind on the date of the execution of the same, had no foundation in the evidence heard by the court.
The main thrust of the plaintiffs action related to the third question which, by order of Mr. Justice Quirke, dated 23rd June, 2006, was one of the issues to be tried.
The court has carefully considered all of the evidence. It is clear that the evidence and commission of the plaintiff, at its height, suggested that her brother would not have made a will at all or, would have made a different will, is not evidence of undue or any influence.
The evidence of Miss Roche goes no further. The evidence of Mr. David Elliot and that of his brother Niall Elliot is that the confluence of circumstances whereby the first named defendant, the executor of the will, was sufficient to ground evidence of undue influence. The court must say, in emphatic terms, that there is no evidence of undue influence disclosed; that the onus of proof in relation to undue influence is clearly on the plaintiff and has not been discharged and, indeed, that the confluence of circumstances does not, in any event, give rise to a suspicion let alone proof of undue influence.
In this regard the court has considered the particulars in the statement of claim and in the reply. There is no evidence whatsoever of dominion and control.
The allegation that the Deceased was not hospitalised after Christmas 2002, notwithstanding that he was quite ill, unable to sleep, unable to walk and was in a very bad way and that the defendants, in those circumstances took control of the Deceased who appeared to be terminally ill was unfounded. Indeed the first named defendant did bring the Deceased to Dr. Curtin on 3rd January, 2003 who, in turn obtained a bed for the Deceased on 21st February, 2003. None of the defendants referred to his being unable to sleep, unable to walk and being in a very bad way. The allegation that the Deceased “should be in hospital at a time when he was being detained under the control of the defendants” was not proved; there was no evidence that he should have been in hospital at an earlier time; that he was being detained nor that he was under the control of the defendants.
No evidence was given that the first named defendant was in “a position to wield authority over an individual particularly an elderly vulnerable individual. Neither was there evidence that the will was made at the behest and instigation of the defendants or either of them. Nor was there any evidence as to the necessity for the Deceased to comply with their requests or that he would be cut off from the affection of the defendants. It was not proven that the Deceased was in a vulnerable position and lacked the ability to resist the pressure and/or demands and/or requests of the defendants or both of them to execute the pretended will in the terms thereof”. There was no evidence of the Deceased being in fear of not complying with the alleged requests.
Moreover, the particulars given in the reply of 31st May 2005, that the documents relating to the preparation of the alleged pretended will “demonstrate that the first named defendant was actively involved in the procuring of the execution of the said will and repeatedly liaised with the solicitor drafting same, both in relation to the drawing up of the said will and its execution” were not proven.
The evidence adduced before the court does not substantiate such an allegation. In particular, the alleged liaison was not substantiated.
The court has had regard to the references to the case law in Brady: Succession Law in Ireland, 2nd Ed. (1995) at 2.91 to 2.94 in relation to the existence of a particular relationship between a testator and a beneficiary not giving rise to a presumption of undue influence. The court considers that the other circumstances surrounding the making of the will which could give rise to such a presumption where testators have been elderly or physically infirm did not arise in the present case.
Brady, following Mellows advised that where there is any doubt about the strength of the evidence in relation to undue influence, where moral guilt is necessary, it is better to issue processes only requiring proof that the testator knew and approved of the contents of the will.
The definition of undue influence including importunity or threats, such as the testator has not the courage to resist, moral command asserted and yielded to for the sake of peace and quiet, or for escaping from the stress of mind or social discomfort, these have carried to a degree in which the free play of the testators judgment, discretion or wishes is overcome, will constitute undue influence is such as to render it inadvisable to plead on the basis of suspicion only.
This is so notwithstanding the matter of public policy wherewith wills should be open to scrutiny and to be found free of suspicion as adumbrated by Budd J. in Re: Morrelli; Vella v. Morrelli [1968] I.R. 11. In that case Budd J. at 34 stated:
“In our country the results arising from the testamentary disposition of property are a fundamental importance to most members of the community and it is valid that the circumstances surrounding the execution of testamentary documents should be open to scrutiny and be above suspicion. Accordingly, it would seem right and proper to me that persons, having real and genuine grounds for believing, or even having suspicions, that a purported will is not valid, should be able to have the circumstances surrounding the execution of that will investigated by the court.”
This, of course, relates to the circumstances of the execution of testamentary documents and may, indeed, include allegations of undue influence.
However, a balance has to be made between the will being executed in accordance with the provisions of the Succession Act and the testator being of sound disposing mind, on the one hand, and more tendentious allegations of duress or undue influence based merely on suspicion.
In the estate of Thomas Wilson Potter deceased: Potter v. Potter (Unreported decision of the High Court of Justice of Northern Ireland, delivered 5th February 2003), Gillen J. held at para. 18 that he had found no evidence at all in that case to ground such a suspicion. On the contrary, all of evidence heard relevant to the period in question, pointed in the opposite direction. The burden of proving undue influence was on the person alleging it. He referred to Wingrove v. Wingrove (1885) 1 P.D. 81, where Sir James Hannen stated that to be undue influence in the eyes of the law there must be – to sum it up in a word, coercion:
“It is only when the will of the person who becomes a testator is coerced into doing that which he or she does not desire to do that it is undue influence.”
Later, at para. 25 it was held:
“Proof of motive and opportunity for the exercise of undue influence is required but the existence of such coupled with the fact that the person who has such motive and opportunity has benefited by the will to the exclusion of others is not sufficient proof of undue influence. There must be positive proof of coercion overpowering the volition of the testator. I reiterate that there was absolutely no evidence of any such influence in this case. The evidence has satisfied me that the Deceased was perfectly able to conduct his own affairs and was capable of resisting any undue influence if it had been brought to bear upon him. Despite all the efforts of well intentioned people to have him change his mode of living to embrace modern facilities, he resisted this and lived exactly as he wanted to. He was not a man to succumb to blandishment or coercion. Much less influence of course will induce a person of weak mental capacity or in a weak state of health to do any act and in such circumstances the court will more readily find undue influence. I repeat that in this case I have found no evidence of weak mental capacity or a weak state of health at the time this will was made. The deceased had the benefit of independent advice from Mr. McRoberts Solicitor.”
It seems to be that the circumstances in that case have some relevance to the present case.
The court has found that there is no evidence of weak mental capacity or indeed, despite the illness of Mr. Roche, a weak state of health that would have made the testator more susceptible to undue influence. Moreover, the Deceased had the benefit of independent advice from a legal executive of some thirty seven years standing. In the circumstance the court finds that the will was not procured by duress or influence of the defendants or either of them.
Winifred Carroll and Mary Jane Carroll v Michelle Carroll
1998 No. 117
Supreme Court
21 July 1999
[2000] 1 I.L.R.M. 210
(Denham, Lynch and Barron JJ)
DENHAM J
(Lynch J concurring) delivered her judgment on 21 July 1999 saying: This is an appeal by the defendant/appellant (hereinafter referred to as the appellant) from the decision of Shanley J delivered on 5 March 1998 [1998] 2 ILRM 218, wherein he held that a deed of 3 May 1990 should be set aside.
*213
This action was at hearing before the High Court on 19, 20 and 24 February 1998 when, inter alia, oral evidence was heard. Facts were found by the learned trial judge commencing with the fact that the respondents brought the action to set aside a conveyance made on 3 May 1990 on the grounds that (a) the conveyance was procured by undue influence, and (b) that it was in itself an improvident transaction. The property in question is a public house together with residential accommodation situated at Burke Street, Fethard, County Tipperary which was owned in fee simple by Thomas Carroll Senior. By the conveyance of 3 May 1990, Thomas Carroll Senior conveyed his interest in the premises to his son Thomas Carroll Junior, ‘In consideration of the natural love and affection which Thomas Carroll bears for his son, Thomas Carroll’ subject only to a right of Thomas Carroll Senior to reside in the dwelling house attached to the public house for the remainder of his lifetime. The plaintiffs/respondents (hereinafter referred to as the respondents) are the legal personal representatives of Thomas Carroll Senior, who is deceased and the appellant is the legal personal representative of Thomas Carroll Junior, who is also deceased.
Family history
The learned trial judge made clear findings of fact in relation to the family. This litigation arises as a result of events occurring in the Carroll family. In 1959 Thomas Carroll Senior married. He purchased a public house by conveyance dated 31 December 1960 wherein the premises at Burke Street, Fethard, County Tipperary were conveyed to Thomas Carroll Senior. Thomas Carroll Senior was then in his late 40s and suffering from arthritis. The public house business was run by his wife Sarah, also known as Sadie. Three children were born to Thomas Carroll Senior and Sarah being Winifred, born on 20 February 1962, Thomas, born on 11 August 1964 and Mary Jane, born on 8 January 1968. They were a happy family. The children started at local schools, Winifred spent her last two years of schooling at a boarding school and Mary Jane spent five years as a boarder in Loreto Convent in Rathfarnham and then did a commercial course in Alexandra College. Thomas was not particularly interested in academic studies, his main interest was farming. A number of his uncles had farms near Fethard. Thomas Carroll Junior spent much of his time working on the farms and helping his uncles. The family lived in the accommodation attached to the public house. The profit from the business of the public house maintained the family. The children helped in the running of the public house and from 1974 Sadie Carroll engaged the services of a full time barman. Winifred, after her schooling, obtained a job as a secretary in Dublin where she lived and travelled home to Fethard every weekend. She got married in 1986. Unfortunately her husband was unwell and ultimately in February 1988 her marriage was annulled. Winifred obtained a loan from a building society and *214 purchased a house in Dublin. She resides there with her sister Mary Jane. Mary Jane obtained a job after she left Alexandra College and lived with her sister Winifred. Every weekend they, the respondents, would travel to Fethard and help in running the public house.
Thomas Carroll Junior, after finishing his schooling, spent a short time in Dublin and then returned to farming and helped his uncles in the running of their farms. In consideration of Thomas Carroll Junior looking after his uncles. Patrick and Philip, and agreeing to reside with them if required to do so, and in consideration of him helping in the management of the farms, on 22 April 1988 Thomas Carroll Junior was registered as full owner of farmlands in Milltown, Co. Tipperary, as tenant in common of one undivided third share of the property, a farm of 185 acres. Also, Thomas Carroll Junior helped his uncle Gus at his farm and when his uncle died in the early 1990s Thomas Carroll Junior was left one half of the farm at Killustry, County Tipperary which amounted to about 45.2 acres.
Sadie Carroll died of cancer on 13 June 1989. She had been ill for some time prior to her death during which time her daughters went home as often as possible and in any event every weekend. When she became too ill to work Thomas Carroll Junior assumed control of the business during the week. At weekends Winifred and Mary Jane helped in the running of the public house. The learned trial judge at pp. 221–223 of the reported judgment found the facts at the time of the death of Sadie Carroll as follows:
Her husband was devastated. At the time of her death, he was in his late 70s and suffered from a number of health complaints; he had severe arthritis which caused him a huge amount of pain and limited his mobility to a great extent. He had a heart complaint which had necessitated two minor operations for the implant of a pacemaker for his heart. He was suffering from a hearing deficit and also suffering from poor sight. Whilst all of these elements meant that he was, to a large extent, dependent upon his children to do things on his behalf, there was no evidence to suggest that his mind was in any way impaired at that stage. He was, of course, extremely depressed at the passing of his wife and the phrase ‘devastated’ was used by a number of witnesses to describe the impact his wife’s death had upon him.
After the death of Sadie Carroll, Mary Jane stayed at Burke Street for a period of six months and during that time helped in the running of the public house and assisted her father in relation to day to day chores. Although Thomas had obligations in relation to his uncles at the Milltown farm, he nonetheless helped out in the running of the public house business and eventually he assumed responsibility for that business on a day to day basis. After the girls returned to Dublin, they came home to Fethard every weekend and when they were there at the weekends they also helped out in the public house. The business of the public house was ‘in the name of’ Thomas Carroll Snr, it had never been in the *215 name of Sadie Carroll or any other member of the family. There was a liability of the business to the Revenue Commissioners in a respect of value added tax of some £20,000. Thomas Carroll Junior was concerned to raise money to pay off and discharge this liability to the Revenue Commissioners. He spoke to his sister Winifred about the possibility of the business being transferred from his father’s name into his name. Winifred recalls explicitly her brother asking her to ask her father to agree to sign over the running of the business to Thomas Carroll Jnr. Initially she said no, but eventually she did ask her father to let her brother run the business for the time being. Mary Jane Carroll recalls her brother mentioning the need to transfer the business to him for certain tax reasons, and she further recalls that some weeks later her brother told her that papers had been signed and that he would be running the business in the future. Winifred Carroll recalls being told by her father that Philip Joyce, a solicitor, had been in the family kitchen and that he, her father, had signed papers but that the papers just related to the running of the business. Winifred Carroll believed that the transfer of the running of the business to her brother from her father, was merely a temporary arrangement until she herself was in a position to come back home to Fethard to run the public house business. Mary Jane Carroll, on the other hand, believed that the transfer of the business to her brother was of a more permanent nature. Neither of the two daughters believed that their father had transferred any ownership in the property at Burke Street to their brother. Both of the daughters firmly believed that it was always the intention of their parents to treat the three children equally in terms of such assets as the parents had to divide among their children. Both Winifred and Mary Jane Carroll were encouraged and comforted in this view by their father regularly saying to them that their home would always be there for them. They recalled him saying this both before and after the transfer dated 3 May 1990 — which is the transfer in dispute in this case. Neither of the girls believed that their father had intended to transfer any ownership in the property to their [brother] by the deed of 3 May 1990. While that is so, there is no suggestion from them that their [brother] in anyway bullied or cajoled their father into transferring the property to him. Each of them is satisfied that, had the father in fact intended to transfer the property in the premises to [his] son in 1990, he would have told each of his daughters that that was what he had done.
The transfer
The transfer in issue was executed on 3 May 1990. Mr Philip Joyce, solicitor, gave evidence to the High Court that he was contacted by Thomas Carroll Junior in respect of the transfer of premises from Thomas Carroll Senior to Thomas Carroll Junior. He was told that there was a VAT liability that Thomas Carroll Junior was anxious to discharge. Mr Joyce recalled visiting Thomas Carroll Senior and sitting with him in his kitchen and discussing the question of the transfer. He recalled that Thomas Carroll Senior told him he wanted his son to have the premises without conditions. Mr Joyce recalled telling Thomas Carroll Senior that he should have a right of residence in and maintenance and *216 support out of the premises. The first meeting lasted 15 minutes and Mr Joyce then prepared a draft transfer which he sent to Thomas Carroll Junior. The draft contained provision for a right of residence and a right to be maintained and supported out of the premises but Mr Joyce recalled Thomas Carroll Junior responding that Thomas Carroll Senior did not want any maintenance or support in the deed. Mr Joyce visited Thomas Carroll Senior for a second time, Mr Joyce recalled going to the meeting with two engrossed deeds, one contained a maintenance and support provision and the other did not; according to Mr Joyce, Thomas Carroll Senior stated that he did not want to have any provision as to maintenance and support in the deed. This second meeting lasted 15 to 20 minutes. Mr Joyce said he was satisfied that Thomas Carroll Senior understood matters fully. Thomas Carroll Senior executed the deed which provided merely for right of residence.
No attendance note
Mr Joyce kept a file relating to the transaction. There is no attendance note of either of the meetings Mr Joyce had with Thomas Carroll Senior. This is most unfortunate. There is correspondence on the file, but it is all directed to Thomas Carroll Junior.
Client
Mr Joyce has acted for more than one member of the family. As Shanley J found at pp. 223–4:
Given the nature of his initial instructions which were relayed to him by Mr Carroll Jnr, it was understandable that Mr Joyce was somewhat uncertain as to whom, strictly speaking, he was acting for in relation to the conveyancing transaction: on one view of events he believed that he was acting for Mr Carroll Snr up until the transfer had been completed, and that thereafter he acted for Mr Carroll Jnr. That he acted for Mr Carroll Jnr thereafter is beyond doubt in that the file contains correspondence directed to financial institutions on behalf of Mr Carroll Jnr, and contains undertakings given by Mr Joyce on behalf of Mr Carroll Jnr to those financial institutions. While on one view of matters Mr Joyce believed that he could be said to be acting for Mr Carroll Snr up until the completion of the transfer, he quite properly allowed that his position was most probably that of a family solicitor who was, in fact, acting for both the transferor and the transferee of the property.
Mr Joyce is now solicitor for the appellant in these proceedings.
Assets
The learned High Court judge found that Mr Joyce made no inquiries of Thomas Carroll Senior as to whether he had any other assets apart from the premises *217 the subject of the transfer. In light of the absence of clauses for maintenance and/or support this is a serious matter for consideration. Mr Joyce did not believe he had any obligation to satisfy himself that Thomas Carroll Senior had any other assets to support himself on the transfer of the premises in issue. The effect of the transfer was that practically all Thomas Carroll Senior’s assets were transferred to Thomas Carroll Junior subject only to the right of residence.
Children
It was also found as a fact that Mr Joyce did not ask any questions concerning other children of Thomas Carroll Senior. Nor did he know of the close knit relationships in this family.
Mr Thomas Carroll Senior
Mr Joyce did not accept that he should have adverted to the possibility that Thomas Carroll Junior would not support Thomas Carroll Senior out of the assets nor the possibility that Thomas Carroll Junior might die before Thomas Carroll Senior leaving him without any financial income. The learned trial judge found that Mr Joyce was firm in his view that he got ‘clear and unambiguous instructions’ from Thomas Carroll Senior. Between 3 May 1990 and 20 March 1992 when he died, Thomas Carroll Senior did not tell his daughters of the transfer of the property. In that time the respondents continued to travel to Fethard each weekend and to help with the public house business. Thomas Carroll Junior ran the business during the week. During those two years Thomas Carroll Senior’s eyesight deteriorated, his arthritis and pain got worse, his hearing and general health deteriorated.
The appellant
Michelle Fogarty met Thomas Carroll Junior in 1991 or early 1992. They married in September 1993. She recollected that Thomas Carroll Junior told her that he owned the premises. She lived in the public house prior to their marriage. When the barman was off duty she worked in the public house. Thomas Carroll Junior spent most of his time on the farm. After their marriage they continued to live at the premises and the respondents continued to go to Fethard each weekend and help in the running of the public house. Thomas Carroll Junior died as a result of a road traffic accident on 17 January 1994. He owned a portion of the Killusty farm in County Tipperary and had an interest in the Milltown farm in County Tipperary as well as the premises in issue.
Shortly after her husband’s death the appellant asked the respondents to give her a lift to Mr Philip Joyce’s office. They saw Mr Joyce also who told them that they, the respondents, had no rights in the premises in Burke Street. The respondents were devastated. However, they continued to travel to the premises at weekends. Tensions grew between the respondents and the appel *218 lant. Matters came to a head in June 1994. Allegations were made by the respondents against the appellant. The appellant alleged that Winifred Carroll said to her ‘You were never good enough for him’. After this the respondents did not stay at the premises at the weekends. Steps were taken and these proceedings were commenced in which the respondents succeeded in the High Court. Against that decision the appellant has appealed.
Appeal
The notice of appeal brought by the appellant was, inter alia, on the following grounds:
1. That the learned trial judge erred in law in finding that the presumption of undue influence arose having regard to the fact that evidence was given by the respondents that Thomas Carroll Junior had not exerted undue influence on the mind of Thomas Carroll Senior.
2. That the learned trial judge erred in law in finding that any presumption of undue influence was not capable of being rebutted or displaced by:
(a) the evidence of the clarity of mind of Thomas Carroll Senior at the time of making the deed,
(b) the availability of independent legal advice,
(c) the admission in evidence by the respondents that Thomas Carroll Junior had not exerted any such undue influence.
3. That the learned trial judge had erred in law and fact in failing to give due weight to evidence on behalf of the appellant.
4. That the learned trial judge’s findings were contrary to and against the weight of the evidence.
5. That the learned trial judge erred in fact and law in finding the said transaction improvident having regard, inter alia, to the clarity of mind of Thomas Carroll Senior in and about that time and the availability of independent legal advice.
Submissions
Mr James Dwyer SC, counsel for the appellant, in oral submissions, on the issue of undue influence quite correctly accepted that the relationship between Thomas Carroll Senior and Thomas Carroll Junior and the circumstances in which Thomas Carroll Senior found himself were such as to raise the presumption of undue influence. He argued that such presumption is only a presumption and is rebuttable. He submitted that it can be rebutted by:
(a) Independent advice, whether legal or other qualified advice, while such independent legal advice is not essential to rebut the transaction, see Provincial Bank of Ireland v. McKeever [1941] IR 471; Hilary Delany, Equity and the Law of Trusts in Ireland (Dublin, 1996). *219
(b) Evidence that having received advice but contrary to same he decided to continue with the transaction as an exercise of his own free will, see Inche Noriah v. Shaik Allie Bin Omar [1929] AC 127; Gregg v. Kidd [1956] IR 183.
(c) Evidence that no influence such as the court has to presume was in fact exercised, see R. (Proctor) v. Hutton [1978] NI 139; Grealish v. Murphy [1946] IR 35; O’Rorke v. Bolingbroke [1876–7] 2 App Cas 814.
On the issue of improvident transactions Mr Dwyer submitted that for equity to intervene in a transaction there must be three elements established, with the onus on the respondents, namely: (1) One party at a serious disadvantage to the other; (2) Transaction at a gross undervalue; (3) Lack of independent legal advice. Mr Dwyer submitted that it is necessary to show some unconscientious use of power by the stronger against the weaker, Hart v. O’Connor [1985] AC 1000. He submitted that the transaction has to be seen in the light of all circumstances of the parties and their motives at the time, see R. (Proctor) v. Hutton [1978] NI 139.
Mr Dwyer, in relation to laches/acquiescence, submitted that it has long been accepted that failure to seek relief will bar same, especially where it is sought to set aside a transaction upon which the other party has acted, Allcard v. Skinner (1887) 36 Ch D 145; Keane, Equity and the Law of Trusts in the Republic of Ireland; J.H. v. W.J.H., High Court 1977 No. 5831P (Keane J) 20 December 1979. He argued that acquiescence will always be a bar to equitable relief, Delany, Equity and the Law of Trusts in Ireland; McCausland v. Young [1949] NI 49.
Mr Dwyer submitted that having regard to the express evidence of both of the respondents that at no stage did their brother unduly influence their father to make the transaction of 3 May 1990, that that of itself must be sufficient to rebut the presumption that he did so influence his father having regard to the decision of Lowry LCJ in R. (Proctor) v. Hutton. He argued that even assuming that such evidence was not available there is clear evidence to the effect that on the date of the transaction Thomas Carroll Senior was in full possession of all his faculties and had received appropriate advice as to the nature of the transaction and how his interest could be safeguarded; having considered this advice and chosen not to follow same was the exercise of his own free will and therefore in accordance with the principles set out by Hailsham J in Inche Noriah v. Shaik Allie Bin Omar. He submitted that looking at the transaction and the nature of same the learned trial judge erred in fact and that he substantially overvalued the premises in question contrary to the evidence which had been given and failed to have due regard to the debts and liabilities in relation to same which would be taken on by Thomas Carroll Junior. He submitted that in holding that the presumption of undue influence had not been rebutted the learned trial judge failed to have any regard to the evidence of the respondents *220 to the effect that there had been no undue influence by or on behalf of Thomas Carroll Junior. Further he submitted that in holding the transaction was an improvident transaction the learned trial judge failed to have any regard to the relationship between Thomas Carroll Senior and Thomas Carroll Junior and the circumstances in which the respondents found themselves, they were settled and working in Dublin and it was long established custom that the business would be transferred to a child, usually the eldest son. He submitted that in deciding that Thomas Carroll Senior had not received adequate independent legal advice the learned trial judge failed to consider the evidence of Philip Joyce in that regard or the evidence of Mr Eoin Binchy. Further, Mr Dwyer submitted that, the learned trial judge had erred on the issue of laches, as the learned trial judge had failed to have due regard to the fact that Thomas Carroll Senior survived the transaction by a considerable period of time and was at all times in full possession of his mental faculties and in communication with his daughters on a constant basis and he failed to express any dissatisfaction with the arrangement or the fact that the same had not been procured by the exercise of his own free will. Further, he submitted that the learned trial judge failed to have any regard to the fact that, subsequent to the death of their father and notwithstanding their expressed views that they did not feel that the premises were owned by their brother, the respondents failed to take any steps to clarify the situation in relation to the premises and it was only after the tragic death of their brother and their subsequent disagreements with the appellant that they took any steps to challenge the transaction where both parties to same were dead.
Mr Dermot Gleeson SC, counsel for the respondents, submitted that the learned trial judge in his assessment of fact and law was right and that his conclusion was well warranted on the evidence. Mr Gleeson submitted that the matter of undue influence is displaced by evidence that clear advice and a full explanation of the circumstances were given. However, in this case there is limited evidence as to advice given and there is no full explanation of the circumstances. As regards the independence of Mr Philip Joyce he pointed out that it had been stated he was the family solicitor, but that in fact Mr Joyce was engaged by Thomas Carroll Junior and paid by Thomas Carroll Junior, and that the name on the file was that of Thomas Carroll Junior. Further, it was pointed out that Mr Philip Joyce is the same solicitor who is now acting for the appellant. In fact, as can be seen in the papers, when Mr Philip Joyce wrote to the bank after the conveyance in issue he said ‘my client, Thomas Carroll Junior’. He submitted that Mr Philip Joyce could not have fully explained the consequences of the transfer to Thomas Carroll Senior, for Mr Philip Joyce did not know the family relationships, nor did he know of Thomas Carroll Senior’s other assets, if any. It was impossible to explain what he did not know. Mr Gleeson submitted that Mr Dwyer had referred to the fact that there was no *221 evidence that Thomas Carroll Senior lacked the appropriate mental capacity. He submitted that this is not a case that Thomas Carroll Senior was not compos mentis. The issue of undue influence is not about that kind of person. It is not that category of infirmity. He submitted that Mr Dwyer was wrong in the test he had suggested for the court. As regards reading over the deed Mr Gleeson submitted that the onus is on the appellant, who is seeking to rebut the presumption of undue influence, to produce the evidence that the deed was read over to Thomas Carroll Senior. That absence was adverted to in the trial. The opportunity to recall witnesses and to deal with that matter was not taken up by counsel. This specific matter was referred to in the High Court. He submitted that there was no evidence that the transfer was read over to Thomas Carroll Senior.
Mr Gleeson submitted that the improvidence argument revolves around Grealish v. Murphy [1946] IR 35. With the adjustment of a single fact one can demonstrate the improvidence. If Thomas Carroll Senior survived until today, when his daughter-in-law had remarried and had a family, then Thomas Carroll Senior would be a sick, depressed and disabled man with no security for his care or medical care.
Mr Gleeson argued that Thomas Carroll Junior assumed the VAT liability of £20,000. However, he submitted that the evidence established that the liability was discharged out of the proceeds of the business. Thomas Carroll Junior took on the liability, the bank loan, but he got that liability with the means to discharge it, i.e. the income from the business.
He submitted that there were three important matters of fact:
1. The status of Thomas Carroll Senior. Thomas Carroll Senior was devastated, depressed, dependent, infirm, sad and lonely. He might have seemed to be in a satisfactory position to a solicitor, but he was unlikely to confide his depression in his solicitor.
2. It was reiterated repeatedly by the respondents that their father had regularly said that there would always be a home for them there. This was properly relied upon by the learned trial judge. This was evidence when considering whether Thomas Carroll Senior understood what he had done, it was a relevant factor for analysis. Thomas Carroll Senior was not a deceitful person. He was fair to all his children. He was a fond family man. He was unlikely to practice deception on his daughters. There was an incongruity in these facts.
3. Mr Gleeson referred to the evidence of Mr Philip Joyce. He pointed out that Mr Philip Joyce was engaged by Thomas Carroll Junior. The whole process was Thomas Carroll Junior’s enterprise. Further Mr Philip Joyce stated repeatedly ‘those were my instructions’. But that was not all he needed to do. Mr Philip Joyce needed to explain fully and to give clear advice. Mr Philip Joyce did not seem to know that the very transaction he was dealing with would leave Thomas Carroll Senior with nothing. Mr Gleeson referred the court to *222 the transcript where Mr Philip Joyce referred on a number of occasions to the fact that he had to ‘take instructions’. Mr Gleeson argued that the law requires a different treatment to elderly men who are giving away all their property. The attitude that he was bound by ‘my instructions’, was a mistake on the part of Mr Joyce. The instructions were not the key. It was not that kind of transaction. There needed to be clear explanations and clear advice to Thomas Carroll Senior to displace the presumption. He submitted that it was evident that there were no instructions given as to Thomas Carroll Senior’s assets or lack of them. On this ground alone he submitted the deed should be set aside. Without knowledge of that fact Mr Philip Joyce could not give advice. Thus, he submitted, the solicitor was under a misapprehension as to his duty. It was not merely a question of obtaining instructions, it was a duty to give advice. Mr Gleeson referred to O’Flanagan v. Ray-Ger Ltd High Court 1980 No. 2858P (Costello J) 28 April 1983; Gregg v. Kidd [1956] IR 183 at pp. 195–196; Grealish v. Murphy [1946] IR 35 at pp. 49–50.
Undue influence — decision
There are two classes of transactions which may be set aside on the grounds of undue influence. They were described by Cotton LJ in Allcard v. Skinner (1887) 36 ChD 145 at p. 171 as:
The question is — Does the case fall within the principles laid down by the decisions of the Court of Chancery in setting aside voluntary gifts executed by parties who at the time were under such influence as, in the opinion of the court, enabled the donor afterwards to set the gift aside? These decisions may be divided into two classes — First, where the court has been satisfied that the gift was the result of influence expressly used by the donee for the purpose; second, where the relations between the donor and donee have at or shortly before the execution of the gift been such as to raise a presumption that the donee had influence over the donor. In such a case the court sets aside the voluntary gift, unless it is proved that in fact the gift was the spontaneous act of the donor acting under circumstances which enabled him to exercise an independent will and which justifies the court in holding that the gift was the result of a free exercise of the donor’s will …. In the second class of cases the court interferes, not on the ground that any wrongful act has in fact been committed by the donee, but on the ground of public policy, and to prevent the relations which existed between the parties and the influence arising therefrom being abused.
This case arises under the second class of case. Counsel for the appellant quite rightly accepted that this case falls into the latter category. He acknowledged that the relationship between Thomas Carroll Senior and Thomas Carroll Junior and the surrounding circumstances gave rise to the presumption of undue influence.
*223
The legal situation arising on such relationship being established was described in Equity and the Law of Trusts in Ireland by Hilary Delany at p.482 as:
Once a relationship giving rise to a presumption of undue influence is established, and it is shown that a ‘substantial benefit’ has been obtained, the onus lies on the donee to establish that the gift or transaction resulted from the ‘free exercise of the donor’s will’. As Dixon J put it in Johnson v. Butress (1936) 56 CLR 113, 134–35, the evidence must establish that the gift was ‘the independent and well-understood act of a man in a position to exercise a free judgment based on information as full as that of the donee’. The manner in which this presumption may be rebutted relates to two main issues; first the question of whether independent legal advice has been received and secondly, whether it can be shown that the decision to make the gift or transfer was ‘a spontaneous and independent act’ or that the donor ‘acted of his own free will’.
I adopt this analysis of the law and apply it. In this case the presumption is established and a substantial benefit was obtained; thus the onus lies on the donee, the appellant, to establish that the transfer was the free exercise of the will of the donor, Thomas Carroll Senior. Thus, it was for the appellant to provide the evidence that the transfer was the independent and free gift of Thomas Carroll Senior. The issue then arising is whether there was evidence upon which the learned trial judge could be satisfied that the presumption was not rebutted. In analysing this the first matter is that of independent legal advice. Although it was submitted that Mr Joyce was the family solicitor on the evidence he appears to have been predominantly that of Thomas Carroll Junior. The legal advice relied upon was given by Mr Joyce. Mr Joyce was engaged and paid by Thomas Carroll Junior. It was Thomas Carroll Junior’s name which was on the file. In his evidence Mr Joyce referred to ‘his instructions’. He appeared to misconceive his duty. Further, Mr Joyce did not know that the asset being transferred was practically the sole asset of Thomas Carroll Senior and so could not advise him fully or explain the consequences of his action. Nor did he know of the family, the relationships with the daughters, and so could not advise on this matter either. In light of the absence of this information he could not advise Thomas Carroll Senior appropriately.
In considering whether Thomas Carroll Senior acted of his own free will an important matter was whether or not the transfer was read over to Thomas Carroll Senior. There was no evidence of this even though the appellant was given an opportunity in the High Court to address the matter.
This case is not about the presence or absence of mental capacity. The onus is on the appellant to produce evidence to dislodge the presumption of undue influence.
The learned trial judge concluded, on this aspect of the case, at pp. 230– *224 231, that:
I am not satisfied that the [appellant] has established as a matter of probability that the transaction was the result of the free exercise of the donor’s will such as to rebut the presumption of undue influence. Mr Joyce allowed that in substance and fact he was acting as the ‘family solicitor’ in the transaction for both parties. He saw the donor on two occasions for a total of about 35–40 minutes, not all of which was devoted to the business of the transfer. It is clear the donor never read the transfer deed nor had it read to him by anyone else. While its contents were apparently discussed between him and Mr Joyce, I am not satisfied that any real consideration was given to the fact that the donor (a frail man, in dependent circumstances) was disposing of all his real assets without reserving to himself (by way of a revocation clause or by way of charging the property with his maintenance and support), any protection for his own future particularly in the event of a falling out with his son, or in the event of his son predeceasing him. It is, I think, clear that Philip Joyce was not aware of the family’s circumstances either in the context of the position of the other members of the family, the totality of the assets held by the family members or the assurances given by the donor to other members of the family including the plaintiffs as to their user of the Burke Street premises during their lifetimes. Thus, while I accept the evidence (which was not really disputed) that the donor was a man who was mentally alert at the date of the transfer, I am not at all happy that at the date of the transfer he had the necessary independent advice (whether it was that of a legal advisor or a competent and qualified lay person) such as would persuade me that the transaction was made of his own free will.
There was evidence before the learned trial judge upon which he could reach these conclusions of fact. Thus, I would affirm his determination.
Mr Dwyer submitted that for the respondents to succeed there should be evidence that Thomas Carroll Junior exercised undue influence on Thomas Carroll Senior. This submission was at the core of the appeal. Counsel argued strongly that as Thomas Carroll Junior himself had not unduly influenced his father that was sufficient to rebut the presumption. He argued that in this case Thomas Carroll Junior did not exercise undue influence, or in Mr Dwyer’s word, ‘wiles’ on Thomas Carroll Senior. That being the case, it being accepted that Thomas Carroll Senior was mentally capable, it was submitted that he could give away his assets as he wished. Mr Dwyer relied on the lack of undue influence exercised by Thomas Carroll Junior and referred to R. (Proctor) v. Hutton [1978] NI 139.
However, this is not a case of actual undue influence being expressly exercised but is rather a case in which the relationship between the donor and donee has raised the presumption of undue influence. It is then for the appellant to rebut the presumption. The burden was described in Inche Noriah v. Shaik Allie Bin Omar [1929] AC 127 at pp. 135–136 by Lord Hailsham LC: *225
It is necessary for the donee to prove that the gift was the result of the free exercise of independent will. The most obvious way to prove this is by establishing that the gift was made after the nature and effect of the transaction had been fully explained to the donor by some independent and qualified person so completely as to satisfy the court that the donor was acting independently of any influence from the donee and with the full appreciation of what he was doing; and in cases where there are no other circumstances this may be the only means by which the donee can rebut the presumption. But the fact to be established is that stated in the judgment already cited of Cotton LJ [in Allcard v. Skinner [1887] 36 Ch D 145] and if evidence is given of circumstances sufficient to establish this fact, their Lordships see no reason for disregarding them merely because they do not include independent advice from a lawyer. Nor are their Lordships prepared to lay down what advice must be received in order to satisfy the rule in cases where independent legal advice is relied upon, further than to say that it must be given with a knowledge of all relevant circumstances and must be such as a competent and honest adviser would give if acting solely in the interests of the donor.
In R. (Proctor) v. Hutton [1978] NI 139 at p. 146 Lord Lowry described the different approaches to the different classes of undue influence. He stated:
When relying on ‘express undue influence’ the plaintiff must prove that an unfair advantage has been gained by an unconscientious use of power in the form of some unfair and improper conduct, some coercion from outside, some overreaching, some form of cheating. The undue influence which is presumed in the second class of case is influence of the same kind: the difference lies in not being able to prove its exercise but, by virtue of the presumption, undue influence is deemed to have been exercised until its exercise is negatived on a balance of probabilities by evidence.
It is clear that what is at issue is whether the donee has taken advantage of his position or
… been assiduous not to do so. The question can only be answered in each case by a meticulous consideration of the facts: Hanbury, Modern Equity (9th ed.), p.652.
I am satisfied that this is the correct approach. In this case, the presumption existing, it was then necessary to conduct a careful analysis of the facts. On the facts it was a matter of determining if the donee, Thomas Carroll Junior, had taken advantage of his position or had been assiduous not to do so. This was not a case where the issue was whether Thomas Carroll Junior had taken advantage of his position expressly. Rather it was a case where in the circumstances assiduous care should have been taken not to take advantage of the position of Thomas Carroll Senior.
*226
The learned trial judge conducted a painstaking analysis of the facts as has been set out fully in this judgment. I am satisfied that the appeal was argued on a mistaken approach to the law. The reason for the equitable law to protect Thomas Carroll Senior is one of public policy — to protect a frail person. As Cotton LJ said in Allcard v. Skinner at p. 171:
In the second class of cases the court interferes, not on the ground that any wrongful act has in fact been committed by the donee, but on the ground of public policy, and to prevent the relations which existed between the parties and the influence arising therefrom being abused.
Thus, the issue is whether on the facts and circumstances of the case the donee has rebutted the presumption of undue influence. The facts and circumstances of this case were fully considered and determined by the learned High Court Judge. In this case the donor was giving away practically his sole asset and the learned trial judge made careful findings of fact about the transaction.
The conclusions reached in Inche Noriah are analogous on the law and facts to those found by the learned trial judge. In that case Lord Hailsham, describing amongst other matters the conduct of the lawyer Mr James Aitken, stated at p. 136:
In the present case their Lordships do not doubt that Mr Aitken acted in good faith; but he seems to have received a good deal of his information from the respondent; he was not made aware of the material fact that the property which was being given away constituted practically the whole estate of the donor, and he certainly does not seem to have brought home to her mind the consequences to herself of what she was doing, or the fact that she could more prudently, and equally effectively, have benefited the donee without undue risk to herself by retaining the property in her own possession during her life and bestowing it upon him by her will. In their Lordships’ view the facts proved by the respondent are not sufficient to rebut the presumption of undue influence which is raised by the relationship proved to have been in existence between the parties; and they regard it as most important from the point of view of public policy to maintain the rule of law which has been laid down and to insist that a gift made under circumstances which give rise to the presumption must be set aside unless the donee is able to satisfy the court of facts sufficient to rebut the presumption.
The learned trial judge reached a similar conclusion on the law in this case. I am satisfied that he was correct, it was not necessary to prove specific acts of undue influence by Thomas Carroll Junior. The evidence as a whole must be considered to see whether the presumption of undue influence has been rebutted. This was done most carefully by the learned trial judge. I would affirm his decision on this aspect of the appeal.
*227
Improvidence of the transaction — decision
Thomas Carroll Senior was disposing of practically his only asset. At the time he was frail. He did not retain any right of maintenance or support. I have already analysed the nature of the legal advice he received and affirmed the decision that it was inadequate. In all the circumstances, as described above, it is clear that Thomas Carroll Senior was an unequal party. In Grealish v. Murphy [1946] IR 35 at pp. 49–50 Gavan-Duffy J stated:
The issue thus raised brings into play Lord Hatherley’s cardinal principle (from which the exceptions are rare) that equity comes to the rescue whenever the parties to a contract have not met upon equal terms, see Lord Hatherley’s judgment (dissenting on facts) in O’Rorke v. Bolingbroke 2 App Cas 814; the corollary is that the court must inquire whether a grantor, shown to be unequal to protecting himself, has had the protection which was his due by reason of his infirmity, and the infirmity may take various forms. The deed here was in law a transaction for value: Colreavy v. Colreavy [1940] IR 71; however tenuous the value may have proved to be in fact, and, of course, a court must be very much slower to undo a transaction for value; but the fundamental principle to justify radical interference by the court is the identical principle, whether value be shown or not, and the recorded examples run from gifts and voluntary settlements (including an abortive marriage settlement) to assignments for a money consideration. The principle has been applied to improvident grants, whether the particular disadvantage entailing the need for protection to the grantor were merely low station and surprise (though the grantor’s rights were fully explained).Evans v. Llewellin 1 Cox Eq Cas 333; or youth and inexperience: Prideaux v. Lonsdale 1 De GJ & S 433; Everitt v. Everitt 10 Eq 405; or age and weak intellect, short of total incapacity, with no fiduciary relation and no ‘arts of inducement’ to condemn the grantee: Longmate v. Ledger 2 Giff 157; Anderson v. Elsworth 3 Giff 154. Even the exuberant or ill-considered dispositions of feckless middle-aged women have had to yield to the same principle: Phillipson v. Kerry 32 Beav 628; Wollaston v. Tribe 9 Eq 44.
He also concluded at p. 51:
In my judgment, without any regard to any question of undue influence, upon Lord Hatherley’s principle and the concurrent authorities the plaintiff by reason of his own weakness of mind, coupled with the deficiencies in the legal advice under which he acted and his unawareness, is entitled to have the improvident indenture of settlement, dated 24 October 1942, set aside and the Register of Freeholders rectified.
Whilst one might not agree with all of the classifications recognised by Gavan Duffy J the legal principle is stated clearly and is applicable to this case.
In light of the evidence of the omissions in relation to the legal advice *228 given, the fact that there was no evidence that the transfer was read over to Thomas Carroll Senior, his frail health, his lack of practically any other assets, his relationship with his daughters and all the circumstances, there was clear evidence upon which the learned trial judge could come to the determination, which he did, at p.232, that:
This in my view is a clear case where the equitable jurisdiction can and should be invoked with a view to setting aside the transaction on the grounds of its improvidence.
I would affirm his conclusion.
Acquiescence Laches — decision
I am satisfied there are no grounds raised upon which the appeal on this point could succeed. On the evidence the respondents learnt of the transfer, obtained a copy thereof and issued proceedings all well within one year. I am satisfied that the learned trial judge was correct in his conclusion that there was no acquiescence by the respondents. Consequently, I would dismiss the appeal on this ground also.
Conclusion
I affirm the judgment and order of the High Court that the deed of 3 May 1990 should be set aside.
BARRON J:
I agree with the judgment delivered by Denham J. I would, however, like to deal with the issue of undue influence.
These were proceedings to set aside a voluntary conveyance from Thomas Carroll Senior to his son Thomas Carroll Junior dated 3 May 1990 whereby Thomas Carroll Senior transferred to his son his licensed premises with living accommodation situate at Burke Street, Fethard, Co. Tipperary.
These premises had been purchased by Thomas Carroll Senior in the year 1960. Thereafter they had comprised also the family home. The business was run by his wife Sadie. They had three children. Winifred was the eldest having been born in 1962. Next came Thomas Junior born in 1964, and the youngest was Mary Jane born in 1968. Until 1974 Sadie Carroll ran the business with the help of a part-time barman. From 1974 there was a full-time barman. Unfortunately, Sadie Carroll died in June 1989. At that stage her husband was aged 78. He had never been seriously involved in the running of the business. After his wife’s death Mary Jane stayed for six months helping to run the premises. When she left to take up a job in Dublin there was no one to run the business.
Thomas Junior was willing to take over the running of the business. How *229 ever, he was basically a farmer and was involved in looking after farms for two of his uncles. Nevertheless he was anxious that his father should make arrangements for him to take over the running of the business. Although Mary Jane had gone to live in Dublin early in 1990 both she and her sister had always helped at weekends in the premises.
Thomas Carroll Senior executed a conveyance of the licensed premises to his son dated 3 May 1990 reserving to himself a right of residence in the premises. Thereafter the licensed premises continued to be run as before with the two daughters coming down at weekends and helping to run the business. Thomas Junior married in September 1993.
Unfortunately, he was killed in a motor accident on 17 January 1994. Some weeks after the plaintiffs learned for the first time that the document which had been executed in May 1990 was not as they had thought an arrangement whereby Thomas was entitled to run the business but in fact a conveyance of the entire property. They were surprised by this since it was a very close knit family and their father had never told them that this is what he had done. On the contrary he had always assured them both before and after the execution of the transfer that they always had a home in the premises. The plaintiffs consulted a solicitor and ultimately the present proceedings were instituted in December 1994.
As found by the learned trial judge the circumstances in which the conveyance came to be executed were as follows. Thomas Junior was anxious that some arrangement should be come to with his father whereby he should run the business. He contacted Philip Joyce, a local solicitor, who was not in fact the family solicitor and told him of the proposed arrangement. Mr Joyce went to see Thomas Senior and obtained instructions from him. These instructions were to transfer the entire premises to his son. There was some doubt as to whether he wanted to reserve a right of residence only or a right of residence coupled with a right of maintenance. In the event Mr Joyce was informed by Thomas Junior that his father wanted a right of residence only. Mr Joyce then had two deeds engrossed, one reserving a right of residence, the other a right of residence and a right of maintenance, and went to see Thomas Senior. Thomas Senior said that he wanted only a right of residence and accordingly, the deed reserving this right only was executed by him. In both meetings the amount of time which Mr Joyce spent with Thomas Senior was approximately half an hour not all of which was devoted to the transaction in hand.
The case made to set aside the deed was that Mr Joyce was unaware of what assets Thomas Senior had nor was he aware of the family relationships. The evidence was also clear that the donor was old and infirm and devastated by the recent death of his wife. She had been some 25 years his junior. It was submitted that the presumption of undue influence arose and that there was no independent legal advice nor any independent advice of any sort given to Thomas Senior. It was also contended that the transaction was an improvident one since *230 it transferred the entire of his estate without reserving to himself the means of living.
The case for the defendant who is the widow of Thomas Junior was to the effect that Thomas Senior was of sound mind and knew very well what he was doing. It was also submitted that he had available to him the independent legal advice of Mr Joyce, further since the plaintiffs did not allege improper conduct on the part of Thomas Junior this rebutted the presumption of undue influence. In relation to the plea that the gift was improvident it was submitted that he had alternative assets and that Thomas Junior provided consideration in that he took over the liabilities of the business.
Shanley J before whom the matter came found for the plaintiffs on both grounds. As against this judgment the defendant has appealed. The essential grounds of appeal as set out on the notice of appeal are:
(1) the clarity and independence of mind of the donor;
(2) the availability of independent legal advice; and
(3) the admission on behalf of the plaintiffs that Thomas Junior had not exerted undue influence on his father.
At the hearing of the appeal counsel on behalf of the appellants accepted that the presumption of undue influence applied, but sought to rebut this by the admission by the plaintiffs that no improper influence had been exercised by their brother over their father. He relied in the main on the Northern Ireland case of R. (Proctor) v. Hutton [1978] NI 139.
In that case the donor was the aunt of the donee. The aunt was aged 85 and had been living alone in Philadelphia. The niece brought her aunt home to live with her as one of the family. Unfortunately, her aunt died within a few weeks. Before her death she had opened a bank account in the joint names of herself and her niece, the money in the account to be payable to ‘either or survivor’. The administrator of the aunt’s estate contested the right of the niece to the monies in the account. In the course of the proceedings, the question arose whether the presumption of undue influence arose and, if so, whether it had been rebutted. Dealing with this presumption Lowry LCJ said at p. 148:
But rebuttable presumptions are rules of evidence. They arise only when the facts are not sufficiently known and operate only until the facts become known.
In the actual case he was satisfied that all the facts were known and that the gift should not be set aside. The relevant facts as found were and are referred to in the judgment of Lowry LCJ, at p. 145, as:
From her demeanour and from the way in which she gave her evidence I formed the view that Mrs Proctor [the niece] was a truthful and reliable witness, and on the basis of her own evidence, I formed the view that when she went out to *231 bring her aunt home from Philadelphia and when she gave her a home in Portadown, she was not concerned about what money her aunt might have or about what money she might receive from her aunt. I also formed the view that Mrs. Proctor is a kind warm-hearted person who went out to America and brought her aunt home out of feelings of kindness and sympathy for a lonely old lady, and not by reason of hope or desire of receiving or extracting a financial reward or benefit from her aunt.
Having regard to the facts, Lowry LCJ said at p. 149:
But proof of adequate independent advice is merely one way of establishing that the gift was ‘the spontaneous act of the donor acting under circumstances which enabled him to exercise an independent will,’ and on the rare occasions (such as the present) when it can be done, the simple and conclusive thing is to prove positively that the donee exercised no influence. When this proof is forthcoming (as in this case) pari passu with the evidence which is said to prove the relationship of trust and confidence, it is more accurate to say that the presumption never arises rather than to say that it has been rebutted.
I would agree that once the full facts are known, it is a matter for the court to determine whether there was or was not undue influence. In such case, the presumption really plays no part.
In reaching his conclusions Lowry LCJ was influenced by the decision of the English Court of Appeal in In re Brocklehurst [1978] Ch 14. That was an unusual case on the facts. The owner of a large estate who on the evidence was reluctant to benefit his nearest relation leased the shooting rights over the estate to a garage proprietor in a totally different social position from that of the testator which had the effect of seriously depreciating its value. The court was satisfied from the evidence that the testator had intended to do what he did, probably as a halfway house between giving his relative the entire estate and none of it. Accordingly, it was held that although on the facts a presumption of undue influence might well have arisen the court was satisfied that the disposition was the free exercise of an independent will of the testator. At p. 152 Lowry LCJ referring to In re Brocklehurst says:
At page 43E the Lord Justice draws attention to a feature with which the facts of this case have something in common and which, I suggest, conduces to a similar result: I refer to the availability, as opposed to the paucity, of evidence on the relevant issues. While the facts of the two cases are completely different, Re Brocklehurst furnishes a most useful reminder of the role played by the actual evidence.
Remembering that presumed undue influence conveys the notion of the undue influence which is alleged to arise from the relationship being actually exer *232 cised, even if not proved, it must, in order to count, be capable of affecting the relevant transaction. All the evidence points away from that possibility in the present case. And if the exercise of undue influence is negatived by evidence which is believed, there can be no presumption in favour of the donor or those claiming through her.
These two cases decide essentially that when all the facts are known surrounding the execution of the impugned document and these show that the donee exercised no influence over the donor then there is no ground to set the deed aside.
In the ordinary way, the person seeking to set aside a voluntary deed does not know all the circumstances surrounding the execution of the document. Accordingly, where the relationship between the donor and donee suggests that the deed might have been procured by undue influence, a presumption arises and the onus of rebutting it is placed upon the donee.
As Bridge LJ said in In re Brocklehurst’s Estate [1978] Ch 14 at p. 43:
… the presumption of undue influence, like other presumptions, is a tool of the lawyer’s trade whose function it is to enable him to arrive at a just result by bridging a gap in the evidence at a point where, in the nature of the case, evidence is difficult or impossible to come by.
What has to be shown is that ‘the gift was the spontaneous act of the donor acting under circumstances which enabled him to exercise an independent will and which justifies the court in holding that the gift was the result of a free exercise of the donor’s will.’ See the judgment of Cotton LJ in Allcard v. Skinner (1887) 36 Ch D 145 at p. 171.
There is no one way in which the presumption may be rebutted. The usual way is to show that the donor had advice from someone who was independent and who was aware of all the relevant circumstances. But as can be seen from R. (Proctor) v. Hutton it is equally good to show that all the relevant facts are before the court and that these show that the donor was not in any way influenced in what he did by the donee. The presumption is important when all the facts are not known. It cannot be rebutted until all the gaps in the evidence are filled and the evidence then denies the existence of any undue influence.
The present case is easily distinguished from R. (Proctor) v. Hutton upon which counsel for the appellant relies. In the present case the donee was instrumental in instructing the solicitor who prepared the document and was present when it was executed. He told the solicitor what his father wanted. The evidence also shows that the latter did not realise what he had done since he continued to tell his daughters that there would always be a home for them in the premises. This evidence leaves a clear doubt as to whether the donor knew what he was doing and also as to what was his real intention.
*233
It is important to realise that a presumption is a rule of evidence which shifts the burden of proof, and where the real intention of the testator cannot be determined the onus has not been discharged.
In the present case, the appellant relies essentially on three matters. The first is that the plaintiffs accept that their brother did not do anything improper. That alone is insufficient. As I have already indicated the evidence does not show clearly why the donor did what he did, that he knew what he was doing, and that it was the free exercise of his will.
The next basis upon which the appellant relies is the clarity and independence of mind of the donor. That may well be so, but it has no bearing on this case since it is not necessary to establish undue influence to establish that the donor was not mentally alert.
The final ground upon which the appellant relies is that the donor received independent legal advice from Mr Joyce. The question of advice by a solicitor was considered by Budd J in Gregg v. Kidd [1956] IR 183. At pp. 201 and 202 Budd J approved certain principles from the judgment of Farwell J in Powell v. Powell [1900] 1 Ch 243. These were:
(1) A solicitor who acts for both parties cannot be independent of the donee in fact; and
(2) to satisfy the court that the donor was acting independently of any influence from the donee and with the full appreciation of what he was doing it should be established that the gift was made after the nature and effect of the transaction had been fully explained to the donor by some independent and qualified person. Further, the advice must be given with a knowledge of all relevant circumstances and must be such as a competent advisor would give if acting solely in the interests of the donor.
Accepting these principles, there can have been no independent advice given by Mr Joyce since at best he was acting for both parties. In any event his evidence was lacking in two important respects:
(1) He did not have knowledge of all the relevant circumstances; and
(2) he did not give advice, he merely set out to carry out the donor’s instructions.
Even if he had been the donor’s solicitor what he did would not have saved the transaction. As I have said before, a solicitor or other professional person does not fulfil his obligation to his client or patient by simply doing what he is asked or instructed to do. He owes such person a duty to exercise his professional skill and judgment and he does not fulfil that duty by blithely following instructions without stopping to consider whether to do so is appropriate. Having done so, he must then give advice as to whether or not what is required of him is proper. Here his duty was to advise the donor to obtain independent advice.
*234
In the present case whatever independence Mr Joyce may have had has been destroyed by his acting in the present proceedings as solicitor to the personal representative of the donee.
In my view this was a case in which the presumption of undue influence arose to transfer the onus to the defendant, an onus which has not been discharged.
Moyles v. Mahon
[2000] IEHC 197 ____
1
1. The Plaintiff is now aged 80 and lives in an old person’s home in Birr, Co. Offaly. He is a widower, his wife having predeceased him in September 1994. There were a number of children of the marriage, which seems to have been unhappy, the eldest of whom is the Defendant Mrs Mahon who married in 1968 and who is now a widow, her husband having died in March 1995.
2. The Plaintiff lived at Kinnitty, Birr, for many years. His mother apparently bought the house in 1935 for him and he moved in there in 1940.
3. In opening the case Mr Maguire described the family as fractious and the evidence certainly bore that out.
4. In the differences between the Plaintiff and his deceased wife the Defendant, while not wishing to cut off her mother, tended to side with the Plaintiff in such rows as occurred. The Defendant’s home appears to have been a haven from the turmoils of Kinnitty for the Plaintiff where he was made welcome and treated with that degree of affection which a dutiful and affectionate daughter could be expected to show to a parent. The Plaintiff went to live with the Defendant in 1991.
5. In 1991 things came to a head in Kinnitty. From a situation of having a regular routine of Christmas dinner and Sunday lunch at the Defendant’s and intermittent visits as a respite home, things changed to a structured position of residence. This came about as a result of matrimonial proceedings between the Plaintiff and his wife. The proceedings in the District Court concluded in a barring order being made in or about October 1991. The Plaintiff was naturally very upset
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2
about this as it meant him having to leave Kinnitty which (notwithstanding that he and his wife lived in separate sections of the house to the extent that there were two front doors) he felt was his home. He contacted the Defendant and did not turn to her in vain. He found accommodation with her in her home. Later, because of some rather unsocial habits (coming in in the early hours of the morning after a night of playing cards; putting on the television; smoking in his bedroom; coughing and making some noise) the Defendant became worried and anxious for the peace and good order of her home. Eventually the Plaintiff’s accommodation was to change to what has been variously called a shed and an apartment, being some form of outhouse or out-building altered and adopted for residential use. At all times the Plaintiff’s meals, other than breakfast on frequest occasions, and his laundry were looked after by the Defendant.
6. Very shortly after the barring order was made and when the Plaintiff was residing with the Defendant he transferred ten-and-a-half or eleven acres of land the subject of Folio 8511 County Offaly, which Mr Enright, the auctioneer called on behalf of the Plaintiff, valued at £16,000 as at 1991 and in respect of which Mr Shepherd’s valuation this morning was considerably lower.
7. The transfer of 27th November 1991 of this land is sought to be set aside for a variety of reasons set out in the pleadings but which were confined at the hearing to (1) the improvidence of the transaction; (2) the absence in the deed of a revocation clause or a right of maintenance and support or a right of residence; (3) the lack of independent legal advice.
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8. Other than the time sequence referred to, the circumstances were that the Plaintiff presented himself with the Defendant to Mr James Lucey, solicitor. Mr Lucey had been his solicitor in the matrimonial proceedings and knew the Plaintiff quite well and got on well with him. Mr Lucey described the Plaintiff as well versed in the ways of the world, placid but determined and an experienced businessman (the Plaintiff had been a butcher for years and dealt in cattle and sheep; he had bought and sold property and helped to the extent of some £70,000 his son Eddie, elsewhere described as £50,000, to buy a property at Mount Bolus; he had given sums of money, machinery and sheep to various members of the family who were grown up and either married or independent).
9. Mr Lucey tried to dissuade the Plaintiff from disposing of his land because a Will would have been quite sufficient. Mr Lucey thought that the Plaintiff wished to reward the Defendant or show her loyalty as she was his sole family ally in the matrimonial dispute. He also thought that the Plaintiff may have wanted to get back at the other members of the family. Mr Lucey was absolutely clear that the Plaintiff unreservedly wanted to transfer the land without reservations and was adamant that he wanted to give the land to the Defendant.
10. Mr Lucey gave the Plaintiff careful and considered advice. Notwithstanding the absence of a written record, I am satisfied that Mr Lucey advised the Plaintiff against proceeding to divest himself of the property and that the concerns pleaded to and advanced in court were properly put to the Plaintiff.
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11. Having carefully considered the evidence of Mr Lucey, I was left with the clearest impression of a sound and sensible man who, no matter what advice he was given, was going to do what he wanted to do. Mr Lucey knew the Defendant with whom he did not have a particularly easy relationship due to an outburst by her in the District Court during the Plaintiff’s matrimonial proceedings (in the events that later occurred in 1992 Mr Lucey came off record and refused further instructions). The Defendant was not a client of Mr Lucey and his only knowledge of her appears to have been as I have indicated.
12. On the basis of Mr Lucey’s evidence I am satisfied that the advice given by him was of an independent character.
13. Elsewhere in his evidence Mr Lucey described the Plaintiff as a pragmatist, genial, very resilient and very determined but calm; that he had considered that he had taken care of the whole family; that he had in the past sold a schoolhouse in Kinnitty for about £4,000, a transaction with which the Defendant may have been involved. Mr Lucey knew the Defendant but never acted for her.
14. Notwithstanding the foregoing, Mr Lucey felt that the Plaintiff should have further legal advice as the transaction was a voluntary conveyance. Accordingly, he gave the Plaintiff a list of about six local solicitors from which the Plaintiff, not the Defendant Mrs Mahon, chose Mr Tom Dalton. The Plaintiff and the Defendant having left Mr Lucey’s office, Mr Lucey inquired by telephone if Mr Dalton would be prepared to advise the Plaintiff on the transaction, which Mr Dalton duly did. Mr Dalton very briefly reported to Mr Lucey and the transaction
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proceeded to a conclusion.
15. Mr Dalton went to meet the Plaintiff at the house of the Defendant where he was living at the time. Mr Dalton had once acted for the Defendant when she purchased a property in Galway. Mr Dalton spoke to the Plaintiff for about half an hour in the absence of the Defendant. He received the deed from the Defendant on his arrival and gave it back to her at the conclusion of the meeting. Mr Dalton was quite clear that the Plaintiff was not under any duress. Furthermore, notwithstanding explaining to the Plaintiff the finality of the transaction and advising him on the question of revocation, maintenance and residence (I accept that the question of residence may have been tangential because there was no residence on the land) the Plaintiff was simply not interested in all this advice and that all the Plaintiff wanted was for the Defendant to have the land with no strings attached. Mr Dalton was clear that the Plaintiff knew what he was doing and acted independently and freely of his own accord.
16. Mr Dalton may not have made exhaustive inquiries as to all the assets and liabilities of the Plaintiff’s estate but I have no doubt that he was acutely aware of these as, according to Mr Lucey, the District Court order in the matrimonial proceedings was under appeal by both parties at this time. In the circumstances I think that it would have been both inappropriate and perhaps unprofessional for Mr Dalton to inquire into matters which were outside the scope of the limited duty undertaken by him and when the Plaintiff had his own solicitor. I am satisfied and find as a fact that the deed is that of the Plaintiff and resulted from an exercise of his own free will.
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17. As Mr Lucey had come off record in the Plaintiff’s matrimonial proceedings the Plaintiff consulted Ms Bernadette Owens, Solicitor, in or about March 1992. Miss Owens never had anything to do with the 1991 transaction. Her instructions were to prosecute the appeal in the Circuit Court. Between March and November 1992 Ms Owens came to deal with at least the five following items of business for the Plaintiff: 1. The matrimonial proceedings in the Circuit Court. At one stage Ms Owens went to the office of J. J. Kennedy, solicitors, in Birr where she had arranged to meet the Plaintiff to go through all the various assets and liabilities of the parties to the matrimonial action. 2. A dispute concerning the key to a gate associated with a hairdressing salon, a separate part of the property at Kinnitty. 3. The question of an assault by Percy Moyles on the Plaintiff and the Defendant. 4. A dispute concerning the issuing by Canada Life of a cheque or draft in respect of the redemption of what appears to have been a joint entitlement in a single name. 5. A Will for the Plaintiff on his instructions at that time. At this time he wanted to know his rights as the surviving spouse.
18. The outcome of the matrimonial proceedings was that the court sanctioned the division of the Kinnitty property into two separate and segregated units, one for the wife and one for the husband. Now that finality had been arrived at (if finality can ever be said to exist in matrimonial disputes) the Plaintiff was anxious to go back to Kinnitty. When he attempted to return, however, he found that the section of the property that had been allocated to him had been ransacked and was uninhabitable, which quite naturally upset him. The rancour that seems to be part of the Kinnitty property and the cost of restoration, seen
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cumulatively with his relative comfort at the Defendant’s premises, seem to have convinced the Plaintiff after a brief interval that he was better off living with the Defendant in Banaher.
19. While accepting that there may be some self-interest in the depiction by the Defendant of the life of the Plaintiff, she was not seriously challenged that the Plaintiff was a genial sociable man, fond of cards and interested in hurling and that most weeks he was out six out of seven nights. Ms Owens does not appear to have had any dealings with the Plaintiff between November 1992 and September 1994.
20. Immediately after the death of his wife in early September 1994 the Plaintiff called on Ms Owens at her office. Both he and the Defendant were not recognised in the death notice in the newspaper, presumably arranged by other family members. When the Plaintiff and the Defendant called on Ms Owens on the day after the funeral the Defendant simply brought her father to the office. The Plaintiff was upset that the house at Kinnitty had been stripped of many items of furniture and effects, items that had been regarded as either bought or as family possessions. On the following day Ms Owens wrote to the solicitors for the deceased. Ms Owens stated that the Plaintiff said that he wanted a third of his wife’s estate in or about this time or shortly thereafter.
21. At no time during the various transactions in 1992 or in September 1994 was the question of a transfer of lands mentioned or discussed by the Plaintiff. He had, as Ms Owens said, left the Kinnitty property to the Defendant in his 1992 Will. Ms Owens said that her first note
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about the transfer of the house in Kinnitty is dated 7th October 1994. When the matter was put to Ms Owens by Mr Maguire, her evidence was that she said to the Plaintiff that he need not be in any hurry about it because he had made a Will in favour of the Defendant. The Plaintiff was alone with Ms Owens when she was giving him advice concerning this transaction. The Defendant was not present during the time devoted to that element of advice and had not been present at a later stage when the transfer was being read over to him. Ms Owens also said that the Plaintiff understood and agreed with its contents. While Ms Owens did not have a very detailed note of her consultation, I am fully satisfied and find as a fact that she advised the Plaintiff about the finality of the deed, explained to him the various ‘reservations’ that he should consider in his own interest, that is a revocation clause, a clause providing for maintenance and support, and advised him that there was no need for him to transfer the property at that time because there was a Will in place to that effect. Ms Owens clearly understood that the Plaintiff, notwithstanding her advice and attempts to dissuade him from going ahead with the transfer, wanted and was determined to have finality. The Plaintiff’s determination was perfectly understandable in view of the unhappy history of the Kinnity property and the shameful family events of the previous month.
22. A considerable time was spent in cross-examining Ms Owens who had a very detailed knowledge of the Plaintiff’s affairs through dealing with the matrimonial proceedings. It was put to her forcefully that she was acting for both parties. Ms Owens said that she did not know the Defendant, save perhaps by sight, had never acted for her or advised her in relation to this transaction or any other transaction
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and did not know much about her, Ms Owens, who was so clearly a truthful witness, said that if she had known that the transaction had the type of bargain contended for, that is, that in addition to natural love and affection the Plaintiff would live with the Defendant for the rest of his life and that the Defendant would look after him, she would not have let the Plaintiff sign the deed but would have tried to defer it if she had known that the Defendant would not keep such a bargain.
23. However, I am satisfied and find as a fact that there was no such bargain; if there was, it was not expressly conveyed to Ms Owens. She may have surmised, as Mr Lucey did, that there may have been some amicable family understanding as between the Plaintiff and the Defendant. As in the case of Mr Lucey in the 1991 transaction, the Plaintiff knew what he wanted to do and did it.
24. When the deed was typed up it was read over to both parties who understood it and signed it. Some two weeks later both parties called back to Ms Owens on 25th October 1994. When she read over and explained to the Plaintiff in the presence of the Defendant the contents of both the Declaration of Insolvency and the Family Home Declaration, the Plaintiff, she says, understood them. The Defendant agreed to discharge the fees and stamp duty on the transaction. Ms Owens was left with the clear impression that the Plaintiff was content to have brought finality to the business, and I find as a fact that it was a free act of the Plaintiff.
25. There was much evidence concerning events which occurred after the execution of both deeds,in particular in 1996. The issues arising
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from this part of the evidence seem to me to be largely irrelevant to the question of the validity of the deed. If, as alleged by the Plaintiff, the Defendant failed to fulfil the alleged bargain to look after the Plaintiff for the rest of his days, this of itself would not affect the validity of the deed. On the other hand, if the deed is invalid, then no matter for how long and how well the Defendant looked after the Plaintiff after the execution of either deed would not of itself render them valid. However, since the issue of the allegation to honour an alleged bargain has been raised, in general I accept and prefer the account of the Defendant.
26. As to the Plaintiff’s dealings with the 11 acres post-1991 (referred to at page 50, question 448 of the Plaintiff’s own evidence) and his post-1994 conduct regarding the house, the indication is that, notwith-
standing the Defendant’s ownership, she allowed him dignity, a sense of usefulness, of having choice and a sense of interest and involvement, and I find such as a fact.
27. I realise that I would wish to be more firm in reaching this view but as at July 1999 the Plaintiff was, unfortunately, regarded as so infirm as to be unable to come to court and his evidence was taken on commission. Accordingly, I did not have the opportunity of assessing the Plaintiff as a witness. I am unimpressed, however,by his refusal or failure to answer a considerable number of questions during the course of his evidence in July 1999, in particular questions 301, 302, 383, 385, 419, 420, 425, 426 and 456. His failure of recollection in other matters of five or eight years earlier is understandable.
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28. Neither party impressed me with the evidence regarding the sums of money. In my view it is an unproven and unsustainable claim.
29. The submissions on behalf of the Plaintiff were as follows:
(1) There is a position of undue influence presumed for the following reasons:
(a) the special relationship of the parties;
(b) the apparent improvidence of the transactions;
(c) the absence of a revocation clause;
(d) the absence of any consideration having regard to the overall assets of the Plaintiff.
(2) There was no independent legal advice, the question arising being whether the transactions were free and independent acts of a man having full advice. Was he emancipated?
(3) Shortly before the execution of the transfers the relationship between the parties was such as to raise a presumption that the Defendant had influence over the Plaintiff. The transfers should be set aside unless the court is satisfied that the gifts in the transfers were the spontaneous free acts of the Plaintiff in circumstances which enabled him to exercise an independent will and which justifies the court in holding that the gifts were the result of a free exercise of the donor’s will. It is submitted that the court should hold on the evidence that a deemed-to-be-coerced situation existed because (a) the Plaintiff did change his mind from time to time; (b)that if, as suggested by the Defendant, the Plaintiff was susceptible to influence by his son Eddie, so also he should be regarded as susceptible to influence by the Defendant.
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(4) The decision of the Supreme Court in Carroll v Carroll [2000] 1 ILRM 210, in particular the passages from the judgment of Denham J. at page 223 dealing with the public policy dimension of deemed undue influence and also her consideration at pages 224 and 225 of the presumption of undue influence are applicable in the instant case.
(5) The nature and quality of the legal advice was deficient because of (a) the absence in both deeds of the safeguards of clauses of revocation; (b) the adequacy of clauses of revocation, maintenance and support and a right of residence; (c) adequacy is not necessarily an expression of free will; (d) Mr Dalton’s evidence disclosed that (i) his recollection was inaccurate in that he did not remember taking an attendance and (ii) he was unaware of the Plaintiff’s general circumstances; (iii) he was not independent because he had in the past acted for the Defendant who, on the occasion of his visit, gave him the actual deed.
(6) All the solicitors said what they would have advised but none had a note to this effect. If notes existed of their attendances on the Plaintiff saying that, the notes did not disclose all they said they would have done, in particular the distinction in character and effect of the deed as opposed to the element of revocability.
(7) In particular, Ms Owens when acting for both parties was wanting in documentary evidence as to the nature and extent of the advice which she gave to the Plaintiff. In the circumstances there must be documentary evidence to corroborate the advice stated in evidence to have been given.
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(8) When the transactions took place in 1991 and 1994 the occasions of vulnerability of the Plaintiff should have been most particularly guarded against.
30. The submissions on behalf of the Defendant were as follows:
(1) The case is distinguishable on its facts from the several cases relied upon in opening by Mr Maguire.
(2) McCormack v Bennett [1973] ILT 127 is still applicable and is the case most closely analogous to the facts in the instant case and should be followed and applied.
(3) The decision of the Supreme Court in Carroll v Carroll , particularly the judgment of Barron J. at pages 231 and 232 of the report, indicates not the position contended for by the Plaintiff but one in which the position is on a case-by-case decision on facts based on the legal principles enunciated in Carroll v Carroll and in the earlier cases therein referred to.
(4) The quality of the legal advice in all instances was quite adequate and sufficient. Mr Lucey and Ms Owens both fully understood the Plaintiff’s circumstances. While Mr Dalton may not have done so, the position is that his advice was still adequate in all the circumstances.
(5) The Plaintiff was well versed in dealing with property and had dealt with other members of the family and looked after them as he considered appropriate, which is borne out by the evidence of Mr Lucey.
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(6) The Plaintiff was not an innocent abroad, as borne out by the evidence not merely of the Defendant but of the various other witnesses, particularly the evidence of the solicitors all three of whom had met the Plaintiff at different times in different places and in different circumstances. All considered him to be a man of calm deliberation but very determined.
(7) The departure of the Plaintiff from Banaher was not as stated by him but as contended for by the Defendant.
(8) The position about the moneys was unconvincing and there was no vouching. To the extent that amounts could be established, other members of the family did receive moneys in or about the same time and of the same order as the Defendant.
31. In summary, my findings are as follows:
(1) Neither the 1991 nor the 1994 deed was executed as a result of undue influence or duress on the part of the Defendant.
(2) The Plaintiff had no mental or physical infirmity which prevented him from understanding the nature and consequences of either deed.
(3) The Plaintiff had the benefit of independent advice from the solicitor of his choice and that advice was fully and carefully made available to him.
(4) The possibility of a clause of revocation was explained to the Plaintiff. The desirability of making a revocable disposition of his property was urged upon him.
(5) Both deeds are on their face improvident in that the Plaintiff disposed of his entire interest or estate in the properties without
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valuable consideration.
(6) Mr Lucey did surmise and Ms Owens had a general understanding that the Plaintiff was executing the deed in favour of the Defendant for looking after him or would look after him.
(7) If there was, as contended for by the Plaintiff, a bargain in the terms alleged, same was not fully expressed to any of the solicitors -Mr Lucey, Mr Dalton and Ms Owens.
(8) The preliminary letter dated 20th March 1997 from the Plaintiff’s solicitor contains no mention of any deal, agreement or bargain.
(9) There was no deal or bargain or arrangement made between the Plaintiff and the Defendant that in consideration for looking after him for the rest of his life or that in consideration for going to live with the Defendant he would transfer either property.
(10) The Plaintiff executed both transfers in his expectation and belief, not induced by the Defendant, that he would secure or reinforce what he believed to be the genuine loyalty and affectionate attention of his daughter the Defendant.
32. It seems to me that the concluding remarks of Finlay J. in McCormack vBennett [1973] ILT 127 at page 131 are apposite:
‘I accept and adopt as applicable to this case the reasoning of Mr Justice Budd in the case of Gregg versus Kitt reported in 1956 Irish Reports at page 183. In particular I would adopt and repeat the portion of his judgment at page 196 where he says “Where the relations between the donor and another person raise a presumption that that other person had influence over the donor and the evidence shows that the third party is both closely related to the donee and was closely associated in action and interest with the donee at the time of events leading to the transaction it would seem to be on principle that the onus in such circumstances must be likewise thrown on the donee to establish that the gift resulted from the free exercise of the donor’s will. The presumption may of course be rebutted either by showing that the donor has had competent independent advice and acted of his
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own free will or in some other way.”
‘As Lord Hailsham says in Inche Noriah versus Shaik Allie Bin Omar “The most obvious way to prove that the gift was the result of the free exercise of independent will is to establish that the gift was made after the nature and effect of the transaction had been fully explained to the donor by some independent and qualified person so completely as to satisfy the Court that the donor was acting independently of any influence from the donee and with full appreciation of what he was doing.” If that method of rebutting the presumption is adopted and it is not the only method open the advice relied on must in the words of Lord Hailsham be given with a knowledge of all relevant circumstances and must be such as a competent and honest adviser would give if acting solely in the interests of the donor.
‘The ignorance by Mr Wallace at the time when he was advising the late James Seery of the promises made by Mrs Bennett in respect of a transfer of the land meant that he was not a person with knowledge of all relevant circumstances. If to defend this deed and to discharge the onus which is in my view upon her the defendant must rely only on the independent advice of Mr Wallace she must therefore fail. However, from the passage which I have quoted that Mr Justice Budd was of the view and in this I am in full agreement with his judgment that the presence of full and satisfactory independent advice is not the only way of proving that a voluntary deed even though it may be on the face of it improvident resulted from the free exercise of the donor’s will. I am satisfied that James Seery in October 1967 himself was particularly concerned to make an out and out transfer of these lands by deed to his daughter Mrs Bennett. I am satisfied that that idea for practical purposes originated with him and certainly did not originate with the defendant Mrs Bennett. His reason for making such a transfer instead of a will which would have been revocable was I am satisfied that he wanted a permanency and finality with regard to the disposition of his affairs. I think it is a reasonable inference from the evidence which I have heard that he was a sufficiently astute man to know that no form of bargain or commercial transaction concerned with his land was likely to secure for himself and his wife what they really needed and that was personal care and attention granted largely through affection and kindness by a member of their family. I believe therefore that James Seery when he executed this deed did so in the expectation and belief which was his own and not induced to them that by so doing he would secure or reinforce what he believed to be the affectionate attendance of his daughter for both himself and his wife. In these circumstances I conclude that there is evidence before me which I accept other than and in addition to the evidence of the independent advice which James Seery received before executing the deed which satisfies me that the deed was his own act and resulted from an exercise of his own free will. In these circumstances as I understand the legal principles applicable I must uphold this deed even though it may on the face of it appear improvident and even though events which occurred after its execution may have made James Seery in his lifetime dissatisfied with it.’
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33. I now proceed to deal with the submissions of the Plaintiff in reply:
(1) There was indeed a situation which would give rise to presumed influence because of the relationship of the parties. The transaction, as I have already held, is improvident. There is no revocation clause and there are no rights reserved. Mr Lucey (who drafted the first deed and gave advice against proceeding) and Ms Owens (who drafted the second deed and gave advice against proceeding) both had full knowledge of the affairs of the donor. Mr Dalton did not. That does not in any way diminish the fact that Mr Dalton was consulted at the behest of Mr Lucey.
(2) Was this man emancipated? The answer to that is an unequivocal yes.
(3) Was the relationship between the parties shortly before the execution of the deed such as to raise the presumption that the Defendant had influence over the Plaintiff? There is certainly some evidence of a sense of dependency. However, I am quite satisfied that the Plaintiff’s decisions were made in each instance to bring to an end the unhappy circumstances in which he found himself and that he was the originator in each instance. There is no evidence that he was prompted, cajoled or induced to take either of these courses. In my view the Plaintiff exercised a spontaneous act of free will in both instances, and that is taking into account the submissions very properly put and skilfully argued by Mr Maguire of the deemed-to-be-coerced situation. I do not believe that the Plaintiff’s change of mind indicates a man of fickleness. Changes were made at different times in different circumstances for what appeared to be good and valid reasons. His susceptibility to influence, as suggested, is part of the peripheral dimension to this case which has not surfaced in court and which is
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clearly rumbling in the background. At the time he was dealing with these two transactions the Plaintiff was not, in my opinion, susceptible to influence. I am quite satisfied that the solicitors gave the Plaintiff time, assessed him, and knew what they and he were about. I do not believe that he was susceptible to influence in any way.
(4) The principles in Carroll v Carroll are still applicable and germane. In Carroll v Carroll the facts are totally distinguishable. In this regard I totally agree with Mr Abbott’s submission. In Carroll v Carroll Mr Joyce acted for Mr Carroll Junior who literally brought his father along by the hand at a time when he was devastated by his wife’s death, unlike the situation here, where Mr Carroll had told his daughters who were coming up and down to Dublin that there would always be a home for them there and who, when Thomas Junior came to running the business, assisted him. The whole series of circumstances until the daughters fell out with their sister-in-law is quite different and quite unrelated to the circumstances in the present case.
34. The nature and quality of the legal advice clearly differed because the times, circumstances and knowledge of the different solicitors varied. However, the two solicitors acting for the Plaintiff, Mr Lucey and Ms Owens, knew about his affairs and had plenty of opportunity of sizing him up. Mr Dalton, who met the Plaintiff once, was satisfied that he was a man with his wits about him and knew what he wanted to do. Having acted in the past for the Defendant Mrs Mahon, I do not think that Mr Dalton coloured the advice given to the Plaintiff. He clearly did not know all the circumstances.
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35. Whatever Mr Lucey told Mr Dalton was not explored. His recollection of not taking an attendance of a once-off half-hour visit does not make the rest of his recollection improbable or unreliable. Part of the gravamen of the Plaintiff’s case is that the advice stated to have been given was not of such a quality as to fully inform the Plaintiff, as the solicitors themselves were not fully informed. I am satisfied that Mr Lucey himself was fully informed. Mr Dalton was fully informed within his remit. But I am equally satisfied that the situation is not to be discounted because there is no note or memorandum (to satisfy the Statute of Frauds!). I know that that is drawing the analogy a bit too far but I do take on board what Mr Maguire said. It is certainly desirable that there should be a fuller note than exists in this case.
36. In that regard I must make a judgment of the witnesses – their integrity, sense of togetherness, sense of directness and their understanding and demeanour. I am satisfied that all three solicitors gave their evidence truthfully, fully and unequivocally and did advise as they stated. I do not think it is necessary to have attendances to corroborate what they said they would have done. It is certainly desirable to have an attendance but it is not a mandatory requirement. If one of these solicitors had died, there might be grave difficulty in certain circumstances without a contemporaneous note.
37. While it is true that in 1991 and in 1994 the position of the Plaintiff may have been vulnerable, he showed himself to be determined and resilient. Without commenting on his intended return to his home in Kinnitty, he showed the signs of a man who was not readily put down. As a businessman, I am satisfied that the Plaintiff made his decisions
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in circumstances where he considered them correct and appropriate and that they were of his own volition.
38. In the circumstances I do not think I need comment on the Defendant’s submissions as they seem to have been borne out by the facts that emerged during the evidence.
O’ Siodhachain v. O’ Mahony
[2002] IEHC 107
JUDGMENT of Mr. Justice Kearns delivered the 31st day of October, 2002.
1. This sorry saga has its origins in the desire of the defendants to sell all or portion of farmlands jointly owned by them and comprising about 70 acres at Ballybeg, Co. Kerry. The farm contains a dwelling house, a number of outhouses and sheds, various fields and is also in part bog land. The events giving rise to the present dispute between the parties arose following an unsuccessful public auction to sell the farm which took place on the 14th day of August 1998.
2. The defendants are a married couple with two young children who married in 1988. The first named defendant was born in or around 1966 and his background was in farming. He left school at 16 years of age. The farm had previously been in the ownership of Sean O’Mahony’s family, but had been transferred to the defendants, subject to a right of residence in favour of Sean O’Mahony’s parents. Prior to the auction in 1998 arrangements had been agreed between the defendants and the O’Mahony parents whereunder the O’Mahony parents would waive their right of residence if the farmhouse was sold, subject to being relocated at the defendants expense.
3. Following their marriage, the defendants had initially lived in the O’Mahony farmhouse at Ballybeg, but in 1992 moved to the nearby village of Gneeveguilla, where, up to and including the time of the auction, they lived in what had formerly been Geraldine O’Mahony’s family home, which in addition had a small grocery shop and a number of petrol pumps.
4. Sean O’Mahony had been involved in a road traffic accident in 1983, following which he found it difficult to carry out farming work on the farm at Ballybeg. He also had some visual disability. In 1998, he and his wife were keen to sell off the farm and to move out of the area altogether. It was their intention at the time to place the proceeds of sale of the farm in an investment property in Dublin.
5. At the auction, the property was offered in different parcels, but neither the farm as a whole or the different parcels attracted any offers or any worthwhile interest. Later that evening, however, and without prior appointment, the plaintiffs arrived at the farmhouse and there spoke with Sean O’Mahony’s father, indicating some degree of interest in the property. On that occasion, Mr. O’Mahony Snr. showed the plaintiffs around the farmhouse, and the yard and outhouses. A phone call was made to the defendants at Gneeveguilla to inform them that the plaintiffs were on the property and some days later the first meeting between the plaintiffs and the defendants took place.
6. The plaintiffs jointly operate as Paralegal Technical Allied Services, which was set up in the mid 1990s to provide assistance to people with legal difficulties. The services consist not merely of giving assistance in getting litigation organised and assembling paper work for that purpose, but in counselling clients and providing assistance to people and families with social or other problems. The evidence in the case indicates that during the period from August 1998 to March 2001, the plaintiffs were involved in investigative work in Donegal, were assisting various litigants in court cases both in Dublin and at different country locations and were also engaged in litigation on their own account.
7. Apart from his paralegal and litigation activities, the first named plaintiff is a political activist and author and producer of cultural and other works. He is a well known figure in the Kerry area.
8. The second named plaintiff was born and educated in Scotland and obtained a BA Honours degree in Paisley. She read for an MA in England. She qualified as a secondary school teacher and came to Ireland in 1982 where she did a FÁS retraining programme in UCC. Thereafter she worked with AnCO, teaching people how to set up in business. She became interested in legal work following the breakdown of her marriage in 1986 which led to frequent court appearances for which she could not get legal aid. She started a BCL course in UCC in 1998 and was conferred with a BCL degree in September 2001. She completed her LLB studies in September of 2001 and sat entrance examinations for the Law Society in April/May, 2002.
9. In August 1998, the plaintiffs were living in rented accommodation in Scartaglen, Co. Kerry, a property which they had to vacate by April of the following year. Mrs. Herron was also the owner of a terraced house at Sunday’s Well in Cork, which had been vacant for a number of years and which was owned subject to a mortgage in favour of Cork Corporation. There are also other burdens affecting this property to which I shall later refer.
10. While Mr. Ó Siodhachain was distantly related to Sean O’Mahony, and while Mr. O’Mahony knew of Mr. Ó Siodhachain by reputation, the parties were not directly or previously acquainted until they first met some days after the abortive auction.
11. As much of the subsequent events, and in particular the intent and motivation of the parties, is hotly contested, I propose at this stage to confine myself to a narrative of the matters which are common case and deal with the conflicts in the course of my review of the evidence given by the witnesses.
12. In the days and weeks following the auction, it is not in dispute that the plaintiffs called to the defendants’ shop at Gneeveguila where discussions of a general nature took place about the possible sale of portion of the farm to the plaintiffs. The plaintiffs interest was mainly focused on the farm house, its curtilage and outhouses, and a number of adjoining fields, which together formed a parcel of about 40 acres.
13. The plaintiffs took the view at a very early stage that the O’Mahony’s were a dysfunctional family, and that Sean O’Mahony in particular was very much dominated by his parents, who very quickly appeared to have formed a dislike of the plaintiffs and were extremely unhappy at the prospect of the defendants selling the farmhouse to the plaintiffs. Mr. Ó Siodhachain encouraged Mrs. O’Mahony to develop more independence on her own account and gave her books on practical philosophy and psychology to assist her in this regard. He encouraged her to attend a course in philosophy in Killarney, which she duly did. Mrs. Herron for her part formed a friendship with Geraldine O’Mahony and the two women commenced confiding in each other.
14. As the relationship between the parties developed, the plaintiffs offered their expertise to the defendants in relation to what might be done with the proceeds of sale of the farm at Ballybeg. At different times, the plaintiffs brought the defendants to view properties as far away from each other as Athlone and Tarbert. Projections and drawings were prepared and supplied by the plaintiffs, such as might put the plaintiffs in the best possible position to apply for loan facilities from a lending institution. Amongst the various proposals under consideration at different times were the extension of the shop premises at Gneeveguilla, the opening of a business in Tarbert and a supermarket project in Rathmore, Co. Kerry, which latter option the defendants ultimately opted to pursue in 2000. Apart from one set of drawings, for which a sum of £200 was paid to Mr. Ó Siodhachain, these services were rendered as a “gift” by the plaintiffs to the defendants.
15. Again, it is not in dispute that the plaintiffs took a very pro-active role in the defendants lives. Nor is it in dispute that Mr. Ó Siodhachain advised and arranged for Mr. O’Mahony to seek and obtain psychological help and counselling to help him overcome problems identified by the plaintiffs. In particular, Mr. Ó Siodhachain recommended that Mr. O’Mahony consult with Dr. Kinsch in Tralee, advice which was taken by Sean O’Mahony. It appears that a number of counselling sessions did take place in late 1998 or early 1999, following which Dr. Kinsch paid a visit to the defendants home at Gneeveguilla for further consultation and discussion with both defendants.
16. Shortly before Christmas, 1998, the defendants spent an evening with the plaintiffs at Scartaglen where a discussion took place about the viability of purchasing a property for letting purposes by creating apartments. It appears to have been on this particular occasion that Mr. Ó Siodhachain produced figures and projections in relation to Mrs. Herron’s property in Cork, which suggested that that property, if renovated and set in flats, might produce a better income then some of the other options under consideration, including the investment property in Dublin. The Sunday’s Well property was close to UCC and thus suitable for students.
17. Following this discussion, Mr. O’Mahony, apparently on his own initiative, went to inspect the property in Cork as did his wife. A number of visits to Sunday’s Well took place, but no surveyor, architect or engineer was ever retained on behalf of the defendants for the purpose of assessing what renovations might be necessary to the Sunday’s Well property or the likely cost of same. Nonetheless, the defendants, and in particular Mrs. O’Mahony, were enthusiastic about pursuing further the idea of acquiring the Cork property, which in turn led to discussions between the parties of a “back to back” arrangement whereby the property in Cork might be transferred to the O’Mahonys in exchange for the defendants 40 acre parcel of land at Ballybeg, including the dwelling house, subject to some allowance for renovations to the Cork property..
18. Lengthy discussions then ensued between, in particular, Mr. Ó Siodhachain and Mr. O’Mahony, to see if mutually satisfactory terms could be arrived at. These discussions also involved what use Mr. O’Mahony would make of the lands at Ballybeg even if transferred to the plaintiffs, and there were also lengthy discussions about machinery, use of outhouses and a penumbra of related issues.
19. On the 10th April 1999, the plaintiffs wrote to the defendants to say that unless the proposed purchase of Ballybeg was completed within 14 days, the plaintiffs would be obliged to rent accommodation elsewhere (their time at Scartaglen having expired) and would hold the O’Mahonys to account for any rent which they might incur in so doing.
20. There then followed an all night discussion between the parties at Gneeveguilla on the 23rd April 1999 which led directly to the execution of the written document which is the subject matter of these proceedings and which is hereinafter referred to as “the first contract”. This document was drawn up and prepared by the plaintiffs. It is not in dispute that the defendants obtained no independent legal advice prior to executing the same.
21. Under the first contract, the defendants agreed to purchase the plaintiffs property at Sunday’s Well in Cork and the plaintiffs agreed to purchase the farmhouse, outbuildings and about 40 acres of land, the property of the defendants at Ballybeg. The purchase price for the Sunday’s Well property was £374,000 and the purchase price for the lands at Ballybeg was £214,000. In addition, the defendants were to get the benefit of a sum of £95,000 to be spent on renovations on the Sunday’s Well property. The document further provided that purchase and sales contracts should be signed and exchanged as soon as practicable but in any event not later than the 8th December 1999.
22. In view of the dispute which subsequently arose between the parties, it is appropriate to set out verbatim those provisions of the document which related to the use and occupation of the lands at Ballybeg prior to the completion of any contract for sale. Firstly, the “preamble” to the document recites the following:
This document is to set out the terms and conditions as agreed between all parties on Saturday April 23, 1999 at Gneeveguilla, Rathmore regarding the sale and transfer of properties between both parties and such interim arrangements as are required to allow all parties the use and benefit of the properties and security for their interests in same prior to the signing of the sales and purchase contracts on or before the 8th December 1999, at which time this agreement will cease to have effect.”
23. The document later provided:
10. “to facilitate the renovation work in Sunday’s Well and to protect the interest of the purchasers and the moneys expended in the reconstruction, the vendors as set out in (1) of the foregoing will lease to the purchasers as set out in (2) of the foregoing the property in Sunday’s Well for a 15 year period.
11. To facilitate the occupation and renovation of Ballybeg the vendors as set out in (2) of the foregoing will lease the property as set out in (4) of the foregoing to the parties as set out in (1) of the foregoing.
12. The 15 year leases as set out in (10) and (11) of the foregoing will come into effect with the signing of this agreement and will remain in force until superseded by the contracts as set out in the preamble.
13. It is agreed by all parties that the contracts for the sale and purchase of Sunday’s Well in Ballybeg properties be exchanged between the parties solicitors as soon as the renovations of the main residence of Sunday’s Well is complete or in any event not later than 8th December 1999.
17. Both parties agreed that this document will cease to have effect on the signing of the contract for both properties on or before the 8th December 1999.”
24. Following the execution of this document, the first named defendants’ parents were prevailed upon to vacate the dwelling house and move into rented accommodation. The plaintiffs moved into occupation of the defendants’ farmhouse in May 1999 and have remained there since. They have paid neither rent nor purchase moneys to the defendants.
25. In the months that followed, no work by way of renovations to Sunday’s Well was carried out, nor was any schedule of works prepared or agreed, nor was any expert or qualified professional retained to advise the defendants in any way in relation to Sunday’s Well.
26. In November 1999 the defendants asked the plaintiffs to be relieved of their obligation to proceed with the transaction insofar as the acquisition of the Sunday’s Well property was concerned. The plaintiffs agreed to this request. Without objection from the defendants, the plaintiffs continued to reside at Ballybeg. No renovations or works were carried out at Ballybeg.
27. In February, 2000, the defendants instructed their solicitor, Mr. Terence Casey, to prepare a contract for the sale of the farm at Ballybeg to the plaintiffs to the sum of £214,000. It was the agreed background position between the parties that a £1,000 deposit would be sufficient, it being recognised that the plaintiffs were not in a position to offer more at that particular time. The contracts were duly sent out and returned with a draft for £1000. This contract is hereinafter referred to as “the second contract”. This contract provided for a closing date some six months from the 11th February 2000. When on the return of the contracts signed by the plaintiffs Mr. Casey noted that a deposit of only £1,000 had been paid with a six month closing period he advised the defendants against proceeding further. For that reason that sale did not proceed and that document is not of itself an issue in these proceedings.
28. Throughout 2000, the plaintiffs made efforts both in Ireland and in the United Kingdom to raise the necessary funds to purchase the defendants’ farm. The defendants for their part remained willing to sell the farm to the plaintiffs, notwithstanding the history to that point. By mid 2000, the defendants had opted to purchase a supermarket premises in Rathmore and were themselves coming under increasing financial pressure to marshal the necessary funds both for the acquisition of the property and for the setting up of the business in Rathmore. The unchallenged evidence of Mr. O’Mahony was that the defendants paid the sum of £260,000 for the shop in Rathmore in which context they applied for and obtained loan advances of 220% of the purchase price from Anglo Irish Bank to buy, stock, and fit out the supermarket for business purposes.
29. Following this acquisition, the defendants instructed Mr. Casey to draw up another contract for the sale of Ballybeg to the plaintiffs (hereinafter referred to as the “third contract”). In this contract the purchase price for the defendants property is stated to be £220,000 with a deposit of £22,000 payable by the plaintiffs. This contract provided that the sale should be closed on or before the 15th March 2001. It further provided that the contract would not be binding on the vendors until such time as it was signed by them and that no contract for sale should be otherwise construed.
30. This contract was in turn sent back in amended form to Mr. Casey through the plaintiffs’ solicitors with a deposit of £100. Mr. Casey called the defendants into his office and advised them strongly against entering into the contract. While the second named defendant was keen to proceed, Mr. Casey said he would not act for the defendants if they insisted on going ahead. It is not in dispute that executed contracts were never returned to the plaintiff’s solicitor.
31. In early March, 2001, the plaintiffs called, without the knowledge of the defendants, to Mr. Casey’s office in Killarney. They sought an extension of the closing date in the third contract from the 15th March, 2001 for at least one month as they believed they could still sell the Cork property. Mr. Casey, who only agreed to the discussion on an “off the record” basis, felt a longer period of time would be required if no purchaser was immediately available, and there was no such purchaser, and invited the plaintiffs through their solicitor to write to him requesting an extension of time. It is not in dispute that at the particular meeting, the plaintiffs offered to waive their entitlement to enforce any claim they might have to the 40 acre farm if they got the dwelling house and yard. Following this meeting, Mr. Casey received a letter from the plaintiff’s solicitor and called his clients in for a meeting.
32. In the course of his discussions with his clients, he voiced his suspicions as to whether or not the plaintiffs were in a position to sell the property in Cork. He advised his clients to seek possession of their farm at Ballybeg and to move to eject the plaintiffs.
33. A notice to quit dated the 5th April, 2001 was served on the plaintiffs requiring them to deliver up possession on or before the 13th April, 2001.
34. District Court ejectment proceedings were commenced on the 30th April, 2001.
The proceedings and the issues
35. The present proceedings were commenced by Plenary Summons issued on the 29th August 2001.
36. In these proceedings, the plaintiffs claimed an injunction prohibiting the defendants from proceeding with the ejectment proceedings pending the determination of the present proceedings. An interlocutory injunction was also sought to restrain the first named defendant from harassing the plaintiffs or interfering with the Plaintiffs in their possession of the premises at Ballybeg pending the determination of the proceedings. The summons further sought a declaration that the document or agreement entered into by the plaintiffs and the defendant on the 28th April 1999 was a lawful and valid lease.
37. A statement of claim was delivered on the 5th September 2001, on which date the plaintiffs issued a Notice of Motion for an Interlocutory Injunction to restrain the first named defendant as hereinbefore stated.
38. A replying Affidavit of Sean O’Mahony was sworn on the 11th September 2001, following which Donal Ó Siodhachain swore an affidavit on the 26th September 2001, to which was added a supplementary affidavit of Patricia Herron on the 1st October 2001.
39. The matter came before this Court on the 22nd October, 2001 when the controversy between the parties was outlined in some detail. I decided that, in the interest of having all matters disposed of at the same time, to injunct the continuance of the District Court proceedings and to set rigid timetables for pleadings and discovery so as to facilitate the earliest possible plenary hearing of all issues.
40. Thereafter a defence and counterclaim were delivered on the 12th November 2001.
41. Before that time, Mr. Terence Casey, who had been named in the proceedings as a third named defendant, successfully brought an application before Murphy J. on the 2nd October 2001 for an order striking out the proceedings against him. This order was the subject matter of an appeal to the Supreme Court which dismissed the appeal of Mr. Ó Siodhachain and Mrs. Herron on the 6th December 2001.
42. Affidavits of discovery were sworn by Mrs. Herron and by Sean O’Mahony, including a supplemental affidavit of discovery sworn by Mrs. Herron on the 31st May, 2002.
43. On the 10th May, 2002, Mrs. Herron brought a further Motion for Discovery seeking further and better discovery as per her letter to Mr. Casey dated 13th March 2002. While this matter had been adjourned in the Master’s Court to a date subsequent to the commencement of the hearing before this Court, the same was dealt with during the course of the hearing before the Court as appears from the review of the evidence.
44. On the 10th May, 2002, the proceedings appeared in a list to fix dates before Kelly J. Having heard Mrs. Herron on that occasion, Kelly J. directed that the proceedings be listed for hearing on Tuesday the 18th June 2002. The plaintiffs appealed the order of Kelly J. to the Supreme Court.
45. On the 18th June 2002 when the matter was listed before Kelly J., the plaintiffs again unsuccessfully applied to adjourn the matter and the plaintiffs then immediately moved an application in the Supreme Court by way of appeal, from the order of Kelly, J., which said application was refused by the Supreme Court.
46. The application for adjournment was renewed to this Court on the 18th June and was also refused.
47. Further applications for adjournments were made by the plaintiffs to this Court during the hearing of the proceedings before this Court. One application which was premised on a medical indisposition affecting Mrs. Herron was granted. Further adjournment applications, sought for the purpose of initiating proceedings against me as the trial Judge in the case, together with other defendants, was refused.
48. As appears from the Affidavit of Patricia Herron sworn herein on the 10th May 2002, the case had been put in to the list to fix dates first on the 11th January, 2002. At that time, it was put back to the next list to fix dates in March, 2002 when Mrs. Herron indicated to the Court that a date for hearing in April or May would not suit her as she had law exams during those months. As already stated, Mrs. Herron, notwithstanding this adjournment, sought the further adjournment refused by Kelly J. on the 10th May, 2002. As is acknowledged by Mrs. Herron in her Affidavit, the time limits specified by me when injuncting the continuance of the District Court proceedings included the requirement that the case should go into the list of fix dates in January 2002.
49. During the course of the hearing, I invited the parties to identify the real issues in the case. As appears from the Statement of Claim delivered by the plaintiffs, certain reliefs sought are in contradiction of each other. In the course of submissions, Mrs. Herron indicated to the Court that the plaintiffs were not placing any form of reliance on the second contract. They were however asserting their right to occupy and remain in occupation of the defendants’ farmhouse and lands at Ballybeg under and by virtue of the document dated 28th April, 1999, as varied by an alleged oral agreement between the parties made thereto when the defendants withdrew from the purchase of the Sunday’s Well property. In the alternative, the plaintiffs contended that a concluded and valid contract was made between the parties in October 2000.
50. Taking in to account the defence and counterclaim delivered in the case, the issues to be determined are as follows:-
(a) Is the document dated 28th April, 1999, effective to create a valid lease for the stated period of fifteen years or otherwise?
(b) If so, was the execution of the document in question procured by undue influence, or was the making of the agreement attended by circumstances of oppression or unfairness which would require the Court to intervene to set it aside?
(c) Was there a concluded and valid contract made between the parties in respect of the lands at Ballybeg in September/October 2000?
(d) Are the defendants entitled to an Order for possession of the farmhouse and lands at Ballybeg?
The Evidence
51. The execution of the first contract not being in dispute, the Court ruled that the defendants should first give evidence in support of their contention that the making of the first contract was procured by undue influence or was otherwise attended by circumstances of oppression or unfairness which would warrant the intervention of the Court.
52. In reviewing the evidence, the Court will not again refer to those undisputed matters and events already outlined which were established in the course of the evidence, but will rather concentrate on those areas where conflicting evidence was given.
53. Sean O’Mahony told the Court that in 1998 the defendants had decided to sell their 70 acre farm with a view to raising money for investment purpose. He also had in mind moving out of the area altogether.
54. He only knew Mr. Ó Siodhachain by repute although he accepted there was a family connection. From the outset, Mr. O’Mahony felt the plaintiffs were trying to win over the trust of his wife and himself and from an early stage, he said, the plaintiffs virtually lived with them on a constant basis, offering all sorts of services, including the preparation of financial projections and plans for various business ideas in which they sought to interest the O’Mahonys. Mr. O’Mahony informed the Court that he was led to believe that the plaintiffs could do any legal work in respect of any sale of the property for nothing if the property was sold to them.
55. After a while, aspects of the relationship with the plaintiffs began to disturb Mr. O’Mahony. He felt they were driving a wedge between himself and his wife, saying, for example, that Sean should be operating the pumps outside the shop operated by his wife at Gneeveguilla, rather than sitting around while his wife did such work. The plaintiffs, according to Mr. O’Mahony, suggested openly that Sean was very manipulated by his parents.
56. Mrs. Herron suggested to Mr. O’Mahony that there were unhappy differences between Mr. O’Mahony and his wife which had led in 1992 to Geraldine leaving their home in Ballybeg without him to go back to her family home at Gneeveguilla with her baby. Mr. O’Mahony stated that they had both gone to Geraldine’s family home with their child in 1992 because her father was extremely ill at the time and required care and support. He did however accept that part of the reason was that Geraldine did not get on too well with his parents. Mrs. Herron pressed Mr. O’Mahony to accept that he was a person prone to depression, that he spent days on end in bed, both before and after the time when she and her co-plaintiff met with him. Mr. O’Mahony agreed that his parents interference did get him down at times, but not to the point where he ever needed to spend time in bed or require medical or psychiatric help. He accepted suggestions from Mrs. Herron that his parents demanded to know the reason on every occasion where Sean sought to use the family car and required him to account for the mileage.
57. Mr. O’Mahony stated that he had received psychiatric counselling from Dr. Matt Kinsch in Tralee some months after first meeting the plaintiffs. This was Mr. Ó Siodhachain’s idea. He had also seen some other counsellor whose name he could not recall. The psychiatric advice he had received was to have no further dealings with Mr. Ó Siodhachain.
58. He was challenged on his assertion that the plaintiffs “lived” with the O’Mahonys, that the plaintiffs were away a lot of the time on other unrelated business. Mr. O’Mahony agreed that this was so, but pointed out that he and his wife had travelled to Donegal with the plaintiffs and visited a number of properties with them.
59. Mr. O’Mahony stated that some months after first meeting with the plaintiffs, they indicated they had a property in Cork that might be a more suitable alternative investment opportunity. He wasn’t interested, but felt his wife Geraldine was very much won over. Some time after Christmas 1998 he went to look at the property which was located in Sundays Well in Cork. He felt it was in a very poor condition having been vacant for a long time. He said that Mr. Ó Siodhachain had suggested swapping the farm at Ballybeg for the plaintiffs property in Cork, subject to some allowance for renovations to the Cork property. This was with a view to making the Cork property fit for letting in flats. Mr. O’Mahony told the Court that he wished to have an accountant, engineer and solicitor look at the proposal, but the plaintiffs, having initially agreed to this approach, changed their minds and suggested instead that they would put the O’Mahonys in touch with solicitors of their nomination. In the event no surveyor, architect or engineer ever looked at the property on their behalf.
60. Mr. O’Mahony went on to describe the events which took place in the dwellinghouse at Gneeveguilla on the night of the 23rd April 1999. On that night, he said that without prior arrangement the plaintiffs called and the parties then sat up all night discussing the proposed deal to be made. His recollection of the leasing arrangement was to the effect that Mr. Ó Siodhachain had mentioned a 99 year lease as being effective as a means of avoiding tax. There had been no mention of any rent in respect of leases on either property. However, when the plaintiffs later that same day came back with a written document in which there was reference to a 15 year lease he asked about it and was told not to worry, that it was for “tax purposes” only. He told his own counsel that it was his understanding that if contracts were not exchanged by the 8th of December 1999, then the whole transaction would fall through. He also said that Mr. Ó Siodhachain had often said to him that the document wasn’t worth the paper it was written on. He did not accept in cross examination that the document was only signed by the parties on the 28th of April 1999. He further stated that when it was signed on Sunday 24th, he was told by the plaintiffs not to discuss the document either with Mr. Casey, the O’Mahonys solicitor, or anyone else. He denied that the document had been left with himself and his wife for some days for their careful consideration or that they had been advised to discuss the entire matter with his solicitor, or some other solicitor.
61. The first written version of the document was seen by him on Sunday evening. It was then when he signed it and he recalled changing the figure in respect of renovations on the Cork property from £75,000 to £95,000.
62. When the document had been executed, he arranged for his parents to move out of the dwellinghouse to rented accommodation. Under the new arrangements worked out with the plaintiffs, he retained use of certain outhouses and a workshop on the lands. Mr. Ó Siodhachain worked some of the fields, cutting and baling hay which, according to Mr.O’Mahony, was left in the fields and needed to be removed by Mr. O’Mahony. Later by agreement, Mr. O’Mahony, let the fields and the plaintiffs occupation of the disputed property was confined to the house and surrounding curtilage.
63. Before the year was out, Mr. O’Mahony told the Court that his wife and he had decided they no longer wished to proceed with the purchase of the Cork property, because they wished to purchase a supermarket in Rathmore. The plaintiffs had no objection to their withdrawal, because at that time no renovations had been carried out to the Cork property and Mr. Ó Siodhachain said that the Cork property was now more valuable than it had been at the time of the execution of the document in April 1999.
64. Despite the fact that the original transaction was now at an end as far as Mr. O’Mahony was concerned, he nonetheless went to see his solicitor, Terence Casey, in January or February 2000 to get him to draw up a contract for the sale of the farm at Ballybeg to the plaintiffs for the sum of £214,000. He told the Court he did not inform Mr. Casey about the document which had been executed in April 1999. However, at another point in his evidence he stated that he may have mentioned the April 1999 document before December of that year when Mr. Casey asked for details of the title to the Sundays Well property. In any event, the second contract fell through when Mr. Casey advised against proceeding further.
65. In the year 2000, Mr. O’Mahony stated that he and his wife were keen to purchase a supermarket premises in Rathmore. They were still willing to sell to the plaintiffs, who kept promising they would come up with the money. They were dealing with Anglo Irish Bank in relation to the financial arrangements for the acquisition in Rathmore. He borrowed 220% of the purchase price of £260,000 for the property. This involved monthly repayments to the bank of £5,000 – £6,000 which was a huge financial burden for them. It was at this time that the third contract came into being. Mr. O’Mahony accepted that before it was drawn up he and his wife had first asked the plaintiffs for a letter of intent to purchase the farm at Ballybeg in the hope that the letter might be sufficient to persuade some financial institution to advance money. However, Anglo Irish Bank was not content to accept the letter. The third contract was then issued by Mr. Casey at the defendants suggestion. This provided for an additional £6,000 to the purchase price which, according to Mr. O’Mahony, was to reflect the increase in value in the farm, and had nothing to do with rent for use or occupation, as was suggested to him by Mrs. Herron. He denied that he had signed or executed this document, or that it was used by way of collateral or security for the Anglo Irish advance. Mr. O’Mahony stated that, apart from the supermarket title itself, various sites on his farm had been offered as collateral to Anglo Irish. The purchase of the supermarket and the move to Rathmore took place in November 2000.
66. Mr. O’Mahony said he was aware that in March 2001 the plaintiffs had gone directly to their solicitor with a view to extending the closing date on the third contract to the end of May. However, the problem was the plaintiffs were never able to come up with the necessary moneys to close. When the third contract came back with a deposit of only £100, Mr. Casey would not accept that they should proceed.
67. Mr. O’Mahony was also cross examined by Mr. Ó Siodhachain who suggested that Mr. O’Mahony had a great deal of experience in assessing building projects and dealing with tradesmen and other business people. Mr. O’Mahony agreed. Mr. Ó Siodhachain suggested that Mr. O’Mahony was perhaps not as incompetent or helpless as he had made out before the Court.
68. Geraldine O’Mahony told the Court that from the time of the first meeting with the plaintiffs that the plaintiffs virtually “lived with them” in Gneeveguilla. Mr. Ó Siodhachain was interested in buying the dwellinghouse on the farm and had all sorts of plans for extensions to the house which would accommodate his published works and legal cases. She described in some detail the months which led up to the all night meeting in April, 1999. In the talks which took place between the parties, Mr. Ó Siodhachain gave her to understand that she was been manipulated by her husband and that she had no control in the family unit. He also came up with the idea that Sean her husband should go for counselling. There was a first counsellor and then Dr. Kinsch, both of whom were nominated by Mr. Ó Siodhachain. She was asked if she had told Mr. Ó Siodhachain that Dr. Kinsch had advised her husband to “grow up”. Mrs. O’Mahony stated that the advice given to her by Dr. Kinch was that her husband should side more with his wife, even though he was an only son. She added that Dr. Kinsch had also advised that the O’Mahonys should altogether eliminate the plaintiffs from their lives.
69. She told the court that Mr. Ó Siodhachain had advised her to, “wake herself up”. She said that Mr. Ó Siodhachain advised her that both he and Mrs. Herron had come into their lives as “a sign from God” that they were there to help them. Mr. Ó Siodhachain led her to believe that if she did as he urged, everything would be fine in their lives. She believed everything he said and the extent to which Mr. Ó Siodhachain’s advice was followed caused a rift between her and her husband which was a mistake she would regret for the rest of her life. Mr. Ó Siodhachain pressed the witness about the visit paid by Dr. Kinch to the O’Mahony family home. Mrs. O’Mahony stated that the plaintiffs had in advance listed questions for her to put to Dr. Kinch about her husband, but denied the suggestion that, in the aftermath, of the visit, she told Mr. Ó Siodhachain that her husband had been left with “no cover” and would have to do whatever was suggested of him at that stage.
70. Both plaintiffs challenged Mrs. O’Mahony on her assertion that they virtually “lived” with the O’Mahonys. It was put to the witness that Mr. Ó Siodhachain and Mrs. Herron were either in Dublin for litigation purposes or in Donegal during the months in question between the auction and the signing up of the first contract in April, 1999. It was also put to the witness that Mr. Ó Siodhachain was busy during these months in political activity on behalf of Martin Ferris of Sinn Fein in Kerry. Mrs. O’Mahony accepted that the plaintiffs were actively involved in these different ways, but they still found lots of time to be calling on the O’Mahonys. She gave an example of how this might operate. On occasions where Mr. Ó Siodhachain might be in Dublin for one of his court cases, he could still call to the shop later on the same day. He often came with stories of court cases which he felt were designed to put the fear of the law into herself and her husband so that they would be afraid to such a degree that they could never stand up in court against the plaintiffs. She told the Court that Mr. Ó Siodhachain claimed to her that he could control the Court process by getting cases adjourned again and again and that he could “put a judge in his place”. As his cases were so often adjourned in this way, he could be back in Mallow by train in the afternoon, following which he would turn up at the defendants home.
71. In relation to the first contract, Mrs. O’Mahony recalled a particular evening in April 1999 when the all night discussions took place. On this occasion, the plaintiffs arrived without prior arrangement and were very business-like and brisk. Contracts were produced, she said, “out of the blue”. Although there had been much talk of selling the farm, neither she or her husband were ready for this and both stated that they needed their solicitors advice and that they would not sign without it. However, the discussions went on all night and the contracts were eventually signed, as far as she was concerned, at 6 o’clock on Sunday morning. Again, as far as Mrs. O’Mahony was concerned, the contracts, whether in draft or typewritten form were not left with herself or her husband for even one day.
72. She told the Court that later that year, following a consultation with their accountant in Killarney, the O’Mahonys decided not to buy the property in Sundays Well. She continued to hope that the plaintiffs would come up with the necessary funds to buy the farm at Ballybeg by selling Sundays Well themselves. In the meantime, the plaintiffs kept coming up with new plans and projects for the O’Mahonys as suitable investment vehicles for the proceeds of any sale. Some of these plans and projections were drawn up by way of gift, others she paid for at £200 a time. At one point, she said, Mr. Ó Siodhachain wanted 1% of the overall figure if moneys were advanced from the bank in respect of the supermarket project at Rathmore.
73. In relation to the second contract, Mrs. O’Mahony stated she had already given cash to Mrs. Herron, out of which she believed the £1,000 deposit was paid. She had advanced moneys to Mrs. Herron, because she believed the plaintiffs did not have any money at that particular point in time.
74. When the opportunity to buy the supermarket in Rathmore came up in 2000, she was still of the view that she would give the plaintiffs a chance to come up with the money to buy the farm at Ballybeg. This was the reason why the third contract was sent out in October 2000. At this point, Mrs. O’Mahony told the Court, that she and her husband were desperate for money, that they were being pressed by suppliers and banks, all calling for payment.
75. Asked why she would give £1,000 towards a deposit to purchase her own property, Mrs. O’Mahony stated that in fact over the term of her acquaintance with Mrs. Herron between 1998 – 2000, she had in fact given to Mrs. Herron sums of money amounting to about £30,000.
76. Despite the collapse of the second contract, Mrs. O’Mahony told the court she still wanted to give the plaintiffs a chance to come up with the money even though she had begun to distance herself from the plaintiffs because of her worries about their difficulty in completing the purchase. She accepted the third contract came into being because Anglo Irish Bank would not accept a letter of intent to purchase the farmhouse from the plaintiffs. The bank required a signed contract. She did not recall any discussion about the amount of the deposit on this occasion. Her belief was that the contract specified a 10% deposit, something around £22,000. She denied that she had agreed that a deposit of £100 would suffice. She equally confirmed that she did not sign the third contract, that Mr. Casey would not permit it. This document was never produced or offered to Anglo Irish Bank by way of security. Instead, other sites from the O’Mahony farm were provided, along with the title deeds to the supermarket premises in Rathmore, as security for the loan which was advanced. Mrs. O’Mahony further stated that she had informed Mrs. Herron that the third contract had not in fact been signed by the O’Mahonys, although she kept hoping the plaintiffs might find the money to complete the transaction. Mr. Ó Siodhachain had told her they hoped to get it from England. However, from the time they moved to Rathmore in November, her husband had been pressing Mr. Ó Siodhachain for the purchase moneys all to no avail. When the third contract fell through, Mr. Casey was only then informed about the document executed in April 1999.
77. It was put to Mrs. O’Mahony that the ejectment proceedings only began when Mr. Ó Siodhachain wrote a letter threatening legal proceedings to injunct her husband from threatening behaviour and conduct. The witness disagreed, although confirming they had received such a letter. She did not accept that her husband regularly fought with tradesmen and staff in their supermarket, or that he had a problem dealing with people. She accepted the suggestion put to her that her husband was not intellectually incapacitated in anyway.
78. Mr. Casey told the Court that he was the defendants solicitor. Some weeks after the auction he heard that people wanted to buy the farmhouse. In February 2000 he was told by the O’Mahonys to draw up a contract for sale. He was advised at that time that the purchasers might not be able to pay the full deposit, so when drawing up the contract, he inserted the purchase price of £214,000 but left the amount of the deposit blank.
79. The contracts came back with a draft for £1,000 from the plaintiff’s solicitor Mr. Enright. Because there was a six month closing date and because the deposit was so small, he felt it was very unwise for the O’Mahonys to enter into contracts and so advised them. They took that advice. He later received a letter from the plaintiff’s solicitor stating that his clients were not now entering contracts and to return the deposit which he did.
80. He had a number of calls from the O’Mahonys saying that the plaintiffs were still keen on buying and had a property in Cork to sell. Through his clients, he passed on request for inspection of the title to the Cork property. He himself was sceptical that the plaintiffs had a property to sell. He was never shown or furnished with the title to the Cork property.
81. He was asked in October 2000 by Geraldine O’Mahony to draw up a further contract, that Mrs. O’Mahony believed that the property in Cork could be sold and so they wanted to go ahead. He was aware that the O’Mahonys were under pressure for money having just bought the premises in Rathmore, a transaction in which he was involved as their solicitor.
82. He drew up this further contract, which had a purchase price of £220,000 and 10% deposit.
83. He later received a telephone call from the plaintiff’s solicitor saying that the deposit was too high and asking if it could it be reduced. He said it could within reason. The contracts came back in amended form with a draft for £100. He called the clients into the office and told them he could not have it on his conscience to allow them enter into these contracts. Mrs. O’Mahony was keen to proceed. He said he would not act. At this point, Mrs. O’Mahony realised how serious the situation was, so they left his office without signing and never did sign. The contracts he said, never left his office, nor were they ever used as security for financial loans.
84. This occurred in early March.
85. Very shortly afterwards, the plaintiffs called to his office without appointment. Mr. O’Siodhachain wanted an “off the record” discussion. The plaintiffs wanted an extension of the closing date from the 15th of March, 2001 for one month, as they believed they could sell the Cork property. He asked if they had a purchaser. They had not. He said that if the property could be sold within two months he would ask the O’Mahonys for an extension.
86. He then got a letter from the plaintiff’s solicitor, Mr. Enright, looking for the extension. However, the letter was not reflective of the conversation he had had in the office with the plaintiffs in that it touched on matters relating to planning permission for the Sunday’s Well property which he had never discussed with Mr. Enright. He called the O’Mahonys in for a meeting and told them that he was suspicious as to whether or not the plaintiffs were making any effort to sell Cork.
87. In the course of this discussion he learned that his clients had entered some sort of arrangement and signed some document in April, 1999. He was completely unaware of this document until then. As soon as he saw it, he advised his clients to seek possession.
88. Cross examined as to whether the third contract was used as security for the loan obtained from Anglo Irish, Mr. Casey produced a letter from Anglo Irish Bank setting out the terms for the proposed advance. Mrs. Herron objected that this document had not been discovered. The Court then indicated that this was an appropriate juncture to deal with the Motion for further and better discovery which had been adjourned from the Master’s Court to the present hearing. Having heard submissions from both sides, the Court determined that the plaintiffs were entitled to further and better discovery such as would include production of this particular document. All other reliefs sought in the adjourned Motion for further and better discovery were refused.
89. He was asked about the meeting which had taken place in his office in March, 2001 attended by the plaintiffs. He was asked if he agreed that the plaintiffs offered to waive their entitlement to enforce their claim to the forty acre farm if they got the farmhouse and yard. Mr. Casey agreed that this suggestion had been made. He further agreed that he had not relayed this information back to its clients because of the confidential nature of the discussion. He had no authority, he said, to vary anything that might have been stated in the contract document.
90. He was asked if he had returned the £100 deposit and if not, why not? Mr. Casey replied that the draft in question remained uncashed on the file. He was asked if he had any recollection of the lease arrangement being discussed at this particular meeting and said he did not.
91. He did not think the O’Mahonys had kept the details of the first contract purposely from him. They told him when they did eventually produce it, that they had been told by the plaintiffs that it was “not worth the paper it was written on”.
92. He accepted that he had not addressed the queries about the title to the Cork premises to the plaintiffs or their solicitor. His concerns had been channelled through the O’Mahonys. His concerns first arose at the time of the second contract, not because of the disclosure of the April, 1999 document of which he then knew nothing, but because his clients kept telling him that the plaintiffs intended closing the sale out of the proceeds of sale of the property on Sundays Well. He wanted to know about the Cork property and subsequently found out that Cork Corporation had the title deeds. In searches which he made in May, 2001 he discovered there were three judgment mortgages affecting the property. The first of these was entered on the 21st of March, 1997 in proceedings between N.I.B. and Patricia Herron in the sum of £2,672. The second was entered on the 25th of April, 2000 in proceedings between A.I.B. and Patricia Herron in the sum of £9,100 and the third was entered or registered on the 26th of May, 2000 in proceedings again involving A.I.B. and Mrs. Herron, this time in the sum of £20,947. All included in addition sums for costs. The three judgment mortgages were registered on foot of judgments obtained against Mrs. Herron, the first in October, 1996 and the other two in November, 1999.
93. Mr. Casey was asked about the notice to quit and the procedures that had taken place at that time. As far as Mr. Casey was concerned, the notice to quit was served first, and then followed by a demand for possession. Asked why the notice the quit refers to a weekly tenancy, Mr. Casey said it was impossible to know from the first contract document what the basis of the plaintiff’s occupation of the farmhouse was, other than as permissive occupant. He assumed it was a week to week type of arrangement. He stressed that sites owned by the O’Mahonys were never put up as collateral for the sums advanced by Anglo Irish Bank, but that some of these sites were being sold to reduce the indebtness of the O’Mahonys to Anglo Irish Bank.
94. He could not recall whether at the meeting the plaintiffs had at one point offered to give up the house at Ballybeg within a reasonable period.
95. Mr. Ó Siodhachain gave evidence to the effect that he became aware of the possible sale of this farm from talk in the locality. On the night of the auction, he and Mrs. Herron went to the farmhouse and were shown over the farmhouse and yard by Sean O’Mahony’s father. He indicated he might be interested in the dwellinghouse and some of the old buildings. Some days later the plaintiffs met with the O’Mahonys. He only visited the farm at Ballybeg two or three times, although they did call to the defendants at their shop in Gneeveguilla. He insisted that a great deal of time was spent by both plaintiffs in Donegal and Dublin over the following months and he rejected suggestions that the plaintiffs virtually lived with the defendants.
96. He accepted a friendship and relationship did develop between the plaintiffs and the defendants. As part of the work he did with Mrs. Herron, he would get involved in counselling clients. In this instance, both he and Mrs. Herron had recognised there were grave problems affecting the O’Mahonys. Both were complaining about interference by in-laws. Mr. O’Mahony in particular was called to account for virtually everything he did by his parents and was being treated like a 15 year old. He formed the view that Sean’s behaviour was dysfunctional and immature and that he should see a counsellor. He recommended Dr. Kinsch to whom he had referred a number of other clients. He also recommended self help books to Geraldine and gave her guidance in relation to a course in practical philosophy, which she pursued as a result. He told Mr. Cross that the various interventions he had made in the O’Mahony’s lives were made for altruistic reasons. He accepted he had supplied the name of an accountancy firm to the O’Mahonys and also a particular branch of the Bank of Ireland. He also had advised and arranged for Mr. O’Mahony to see a particular Harley Street specialist in relation to his visual difficulties. He accepted he had also advised the O’Mahonys on how to furnish their home at Gneegevuilla so as to make the best possible impression on any representative of a lending institution that might call out to discuss business with the O’Mahonys.
97. He accepted that the plaintiffs had prepared background paper work, including financial projections, for a number of projects which they had discussed with the defendants. One night before Christmas 1998 the O’Mahonys came to their home in Scartaglen to discuss a particular project or property. On that particular evening, Mr. Ó Siodhachain by way of example and illustration as to how an investment property could yield profit, showed to Mr. O’Mahony some projections he had prepared in relation to Mrs. Herron’s house in Sunday’s Well to give the defendants some idea of what might be necessary when approaching a lending institution seeking finance. Some time later he found out that Sean O’Mahony had gone to Cork to look at the property from the outside and was very enthusiastic about it. Mrs. O’Mahony did likewise and both O’Mahonys came to the plaintiffs with a proposition that they would buy the Sunday’s Well property if the plaintiffs bought the farm.
98. In the months leading up to April 1999 discussions began on a back to back arrangement. These discussions took many weeks and at various times he wanted to be finished with the whole discussion because of Mr. O’Mahony’s attitude which kept stringing things out for weeks. Mr. Cross read to him the contents of a letter dated 10th April 1999, suggesting it contained a threat that unless the purchase of Ballybeg was completed within 14 days that the O’Mahonys would be held responsible for rented accommodation elsewhere should the plaintiffs move out of Scartaglen, together with other expenses which Mr. Ó Siodhachain might incur. Mr. Ó Siodhachain stated that Mrs. O’Mahony had asked for the particular letter so as to get her husband’s parents out of the dwellinghouse. They had dug in their heels after the auction and were now demanding a new house. Also, he said, Mrs. O’Mahony was getting hate mail locally. The letter was designed to bring that to an end, because it was something she could show around to her relatives to highlight the difficulty that the O’Mahonys would be in unless the deal went ahead. The only pressure applied arose from the fact that the plaintiffs had to vacate the property at Scartaglen.
99. Mr. Ó Siodhachain stated there were at least three longhand drafts of the first contract before the all night meeting at the end of April 1999. On that night, the plaintiffs brought the final draft in longhand with them. He told Mr. O’Mahony at the outset that things were going to be finalised that night or the matter would go no further. He agreed that discussions went on all night because they were discussing matters which were not dealt with in the document, such as plant and machinery and how various EC land schemes would affect the property.
100. The reference to a lease had been included in the draft and in the discussions, because he was aware from other work he had done that no bank or finance house would give money or grant a loan except on a 15 year lease. He denied that he ever said the document was not worth the paper it was written on, although his own solicitor, Mr. Enright, had told him later that he was not very happy with it.
101. Some days later a typed version of the document was presented to the O’Mahonys. Sean O’Mahony wanted to change the sum for renovations to the Cork property from £75,000 to £95,000. Mr. Ó Siodhachain agreed and offered this as the reason why the written amendment appears on the typed version of the document. The document was then left with the O’Mahonys for a few days. Mr. Ó Siodhachain told the Court that the plaintiffs urged the O’Mahonys to show it to Mr. Casey, but they did not want that. They then suggested to Mr. O’Mahony that he take it to some other solicitor. He told the Court he in fact mentioned the solicitor of a particular trader with whom Mr. O’Mahony had had business dealings with in Portlaoise. He told Mr. Cross, however, that at the time of signing up of the first contract, which he said took place on the 28th of April, he had not checked to see if the O’Mahonys had taken any legal advice in the interim from either Mr. Casey or any other solicitor.
102. Mr. Cross asked what the purpose of the 15 year lease would be in the context of a sale of the property. Mr. Ó Siodhachain stated that the first contract was “facilitatory” in the sense that if anything went wrong, both of the parties would be protected by the leases. Mr. Ó Siodhachain gave as an example the possibility of a car accident happening which might affect one or more of the parties. He also felt it could constitute a form of security to raise funds. It was not written in for tax reasons of any sort.
103. In November 1999 the O’Mahonys asked to be released from the Sundays Well transaction, something which he and Mrs. Herron were quite willing to do. In the discussions which then took place, a sum was agreed for rent up to the probable closing date. Mr. Ó Siodhachain stated that this was a round figure to cover the time from the commencement of occupation of the plaintiffs at Ballybeg until the loan which would enable them complete the purchase came through. Apart from this variation, Mr. Ó Siodhachain stated that the O’Mahonys were willing to confirm all the other arrangements in relation to the farm at Ballybeg insofar as the plaintiffs were concerned.
104. Mr. Ó Siodhachain stated he was aware the O’Mahonys needed money for their business plans, including the project at Rathmore in respect of which he had helped them with financial projections. Insofar as closing the farm deal with the O’Mahonys was concerned, Mr. Ó Siodhachain stated that he and Mrs. Herron tried to get funds from lending institutions. However, as neither of them had any conventional income, they could not raise this finance in Ireland. They therefore tried to secure the loan from a company in the UK which specialised in asset based loans. They were for all practical purposes approved for such an advance in 2000, but the foot and mouth epidemic put paid to those arrangements. At a later stage the application for funding from the UK was reactivated, but although the plaintiffs were approved in principle for a loan, the lending institution declined to advance funds in Ireland.
105. Insofar as the third contract was concerned, Mr. Ó Siodhachain stated that Geraldine O’Mahony was quite desperate because of financial pressure. She was anxious to have a contract executed for the purpose of obtaining finance. He had asked her if £100 was a sufficient deposit if the plaintiffs assisted in the execution of a third contract and she agreed. Even her own solicitor saw this deposit figure as ludicrous. Mr. Ó Siodhachain stated that the deposit figure was always intended to be £100 in the third contract, and not 10%, or £22,000, which insertion was amended by his solicitor.
106. After they executed the third contract, they kept phoning Mr. Enright to see if signed contracts had been returned. Mr. Enright kept saying that they had not come in yet.
107. Mr. Ó Siodhachain stated that the plaintiffs were concerned about the financial predicament which were the O’Mahonys were in. The plaintiffs felt they might be able to help the O’Mahonys by releasing the farm portion of the lands from the contract so that the O’Mahonys could in turn sell it and reduce their financial overheads. Against that background, he rang Mr. Casey and asked if he would meet with them, a proposal to which Mr. Casey agreed.
108. At the meeting, Mr. Casey said that the offer to not purchase the farm was really of no use, that no one would now buy the farm in the middle of a foot and mouth crisis. Mr. Ó Siodhachain stated that they also offered to vacate the dwellinghouse within a reasonable time. They also discussed the possible extension of the closing date in the contract, and Mr. Ó Siodhachain asked for one month beyond the 15th March deadline. Mr. Casey stated that more time would be required and asked if the plaintiffs would have their own solicitors write a letter to him seeking the extension in question.
109. In 2000, Mr. Ó Siodhachain stated that Mr. O’Mahony’s attitude changed and he became very two faced. Mr. Ó Siodhachain therefore stopped calling to Rathmore. After March 2001 Mr. O’Mahony resorted to threatening behaviour and was involved in a number of incidents. He kept opening and leaving open the plaintiffs gates and went through various outhouses and sheds without permission. He brought out the auction sign which had been put away and generally made a nuisance of himself with the plaintiffs. It was against that background that Mr. Ó Siodhachain had written a letter in early April threatening legal proceedings to injunct Sean O’Mahony from these activities.
110. Mr. Ó Siodhachain told Mr. Cross that he didn’t really know in any legal sense what a lease was. He accepted there was no mention of any rent in the first contract, because at that time the O’Mahonys were going to purchase the Cork property in exactly the same way as the plaintiffs were buying the farm at Ballybeg. Once the back to back arrangements ceased to exist, Mr. Ó Siodhachain accepted that some rent would have to be paid in respect of their occupation of the farm. He could not say why this sum for rent if agreed and identified as such was not mentioned or included in the second contract or described as such in the third contract.
111. Mrs. Herron told the Court that from August 1998 onwards she spent a great deal of time in Donegal, Dublin and Cork. She had three or four cases in progress in Dublin for people she was helping. She also had a Supreme Court appeal of her own in preparation and in October was doing a law course in UCC. In addition, her son was in hospital in March 1999 in Cork and required daily visits from her.
112. She accepted, however, that she would call on average about twice a week while passing the shop at Gneegevuilla and in this way became very friendly with Mrs. O’Mahony. She confirmed that the O’Mahonys had come with them to Donegal in October 1998 for several days when they looked at a range of properties. At a later point they also looked at a property in Banna, Co. Kerry.
113. She developed a friendship with Geraldine O’Mahony and noticed on one occasion that she was very upset while Mrs. Herron was present in the house. Mrs. Herron followed Geraldine into her kitchen where Geraldine confided certain matters in her. After that she would also confide in Geraldine and they became friends and remained so until March, 2001. Mrs. Herron told the Court that when the plaintiffs first met the O’Mahonys, it was her impression that they were an entirely dysfunctional family. She did not accept that pressure had been put on the O’Mahonys to sign the first document. The only pressure lay in the fact that the plaintiffs had to quickly find somewhere else to live as their stay in Scartaglen was ending. Mrs. Herron felt they had been strung along for weeks by the O’Mahonys. The purpose of the letter dated 10th April 1999 was to deal with a situation where the O’Mahonys parents would not move out of Ballybeg. The O’Mahonys had failed to spell out clearly to Sean O’Mahony’s parents that they had to go.
114. Mrs. Herron insisted that the parties worked from a longhand draft on the 23rd of April during the all night discussion. Thereafter she prepared the typed document from the longhand draft on the 26th and gave it to the O’Mahonys that evening. Everyone signed the document on the 28th. She had no recollection that Sean O’Mahony changed the figure for renovations from £75,000 to £95,000 on the typed document.
115. On the night of the long discussion, Geraldine and herself had sat away from the two men who were by the fireside. Mr. O’Mahony nit picked through every single item in the agreement. In the end, Mrs. O’Mahony told her husband to give it a rest or conclude it.
116. She accepted that she put in the preamble by way of addition to the text contained in the draft when preparing the first contract. At that time she knew nothing about land law or property law. It was only when pursuing her LLB course that she learned anything about leases or the Statute of Frauds or such matters.
117. Mr. Cross pressed Mrs. Herron as to whether or not the question of legal advice had arisen prior to the execution of the first document. Mrs. Herron stated that they had recommended to the O’Mahonys that they get legal advice, but the O’Mahonys did not want to go to Mr. Casey because he was acting for the O’Mahony parents as well. The plaintiffs had suggested that the O’Mahonys go to someone else. However, when the document was signed up on the 28th, Mrs. Herron accepted she did not ask if the O’Mahonys had sought or received any independent legal advice in the meantime.
118. In relation to the second contract, Mrs. Herron was adamant that the deposit was paid out of her own moneys and produced a draft for the deposit drawn on her own bank, TSB in Killarney. She denied that the money in question had been given to her by Geraldine O’Mahony. She did become aware, when Mr. Casey would not allow the plaintiffs sign the second contract, that Mr. Casey wanted to see the title deeds to her Cork property. She contacted Cork Corporation who had a mortgage over the property, but it took her some considerable time to get the title documents and as she never got a formal request for same from Mr. Casey she decided not to hand them over. When the O’Mahonys pulled out of the Cork transaction in November in 1999, the plaintiffs then offered to pay for the use and occupation of Ballybeg from the time they had moved in up to the probable closing date for the transaction. A sum of £6,000 was suggested by Mr. Ó Siodhachain and accepted by the O’Mahonys. Other all aspects of the arrangements concluded in April 1999 were confirmed.
119. When the second contract failed, Mrs. Herron stated that the plaintiffs continued trying to raise funds to complete the purchase of Ballybeg. She confirmed the difficulties as outlined by Mr. Ó Siodhachain.
120. In relation to the third contract, Mrs. Herron stated that Geraldine came to her in September 2000 saying she needed a letter of intent to purchase Ballybeg, which the plaintiffs gave her. She later stated that the lending institution was not satisfied with the letter of intent, that she needed a signed contract. Mrs. Herron explained that the plaintiffs did not at that time have the necessary 10% deposit, whereupon Geraldine O’Mahony stated that £100 would suffice and that she would make her solicitor take it. At no stage were the plaintiffs ever told that the O’Mahonys had not signed this third contract.
121. From 2000 onwards, Sean O’Mahony’s attitude towards the plaintiffs changed, although she remained friendly with Geraldine, often helping her in the supermarket following the O’Mahonys move to Rathmore in November 2000. In the new year of 2001, Sean O’Mahony became markedly hostile. He would make snide and nasty remarks and kept asking if the plaintiffs had the money to close the purchase, stating that the closing date was approaching. Geraldine had told Mrs. Herron that she was under terrible financial pressure.
122. The plaintiffs called to Mr. Casey’s office in March 2001 in circumstances already outlined by Mr. Ó Siodhachain. They told Mr. Casey they wanted to help the O’Mahonys. Mrs. Herron said they offered to give up the 40 acres of land and buy only the farmhouse. Mr. Casey said no one would now buy the farm during the foot and mouth crisis. They also offered to give up the house and move out altogether if given reasonable time. Mrs. Herron said that the plaintiffs told Mr. Casey they were awaiting funds, whereupon Mr. Casey suggested extending the closing date. Mr. Casey suggested a longer period than that mentioned by the plaintiffs and suggested that the plaintiffs have their solicitor write to him officially, seeking an appropriate extension. Such a letter was sent by their solicitor to Mr. Casey on the 7th of March 2001.
123. The 15th of March came and went Mrs Herron stated the plaintiffs assumed the extension was operating. Mr. O’Mahony continued to be nasty and unpleasant and when he put the FOR SALE sign, which had been in a shed, in a position where it could be seen outside the farmhouse in Ballybeg by passing traffic, they caused a letter to be sent in early April threatening proceedings against him. Notice to Quit was then served on them.
124. At a late stage in her evidence, Mr. Cross asked Mrs. Herron to put some sort of figure on the moneys which Geraldine O’Mahony had advanced to her during the term of their acquaintance. Mrs. Herron initially stated that she had received loans from Geraldine O’Mahony amounting to somewhere between £15,000 – £30,000 in total. Mr. Cross then put to Mrs. Herron a letter which she had written in May, 2000 acknowledging that as of that date a sum of £35,000 was due in respect of loans advanced by Geraldine O’Mahony to her. Mrs. Herron accepted that this was so and acknowledged her obligation to pay the sum back to Mrs. O’Mahony, whom she described as a very generous person.
Submissions of the Parties
125. On behalf of the defendants, Mr. Cross contended that the document dated 28th April 1999 was not effective to create a valid lease. Section 4 of Deasy’s Act required that any contract to create the relation of landlord and tenant for any definite period of time, not being from year to year or any lesser period, must be evidenced by note in writing. While the document was executed by all parties, clauses 11 and 12 were those provisions relied upon by the plaintiffs to suggest that a lease had been created. No other documents of any kind whatsoever had been produced to amplify or vary those terms which conspicuously failed to make provision for rent of any kind. Section 3 of Deasy’s Act specifically provided that the relationship of landlord and tenant is founded on contract made between the parties in all cases where there is an agreement by one party to hold land from another in consideration of rent.
126. While the plaintiffs had argued that upon their release from the Sundays Well agreement, the original agreement of April 1999 had been varied so as to provide for a rent of £6,000, there was no note or memorandum of this amended agreement, if any.
127. The document in any event was clear that its effect would come to an end on the 8th of December 1999. It was at all times obvious that the “leases” would remain in force only until superseded by the contracts as set out in the preamble which had to be signed before a specified date, failing which the whole arrangement came to an end. Alternatively, he submitted, the document was self contradictory, and as it was prepared by the plaintiffs, it should be construed against them under the contra preferentem rule. Alternatively, there had been a total failure of consideration in respect of the April 1999 document. The plaintiffs had paid no money of any kind to the defendants. The document relied upon failed to specify any rent for any purported lease.
128. Secondly, it was submitted that if the document of April 1999 was effective to create some sort of valid lease, it was procured by undue influence or other circumstances of oppression and unfairness which demanded that the Court should set it aside.
129. Both parties in their submissions were in agreement as to the legal requirements necessary for the court to intervene on this basis. Firstly, it could be established by the claimant that the alleged wrongdoer exerted actual undue influence on the complainant to enter into the particular transaction being impugned. Alternatively, undue influence could be presumed where there was a relationship of trust and confidence between the complainant and wrongdoer of such a nature that it was fair to presume that the wrongdoer abused the relationship in procuring the complainant to enter into the impugned transaction. Once a confidential relationship had been established by evidence, the burden shifted to an alleged wrongdoer to prove that the complainant entered into the impugned transaction freely, for example by showing that the complainant had independent legal advice.
130. Certain relationships, such as solicitor inclined, raised the presumption as a matter of law. Even where the relationship did not fall into that category, the complainant could still establish the de facto existence of a relationship under which the complainant generally reposed trust and confidence in the wrongdoer, whereupon the existence of the relationship raised the presumption of undue influence. This formulation of the test had been approved by the Supreme Court in Bank of Nova Scotia -v- Hogan [1996] 3 IR 239, 246.
131. Mr. Cross submitted that the plaintiffs did in fact use actual undue influence on the defendants and on that ground alone the agreement could be set aside. Alternatively, the evidence clearly showed a relationship of trust and confidence reposed by the defendants in the plaintiffs prior to the signing of the document in April 1999 and thereafter, sufficient to shift the burden to the plaintiffs to establish that the defendants entered into the agreement freely and with independent legal advice. The evidence clearly showed that the defendants did not have the benefit of independent legal advice. Further, he submitted, the plaintiffs, and in particular the second named plaintiff, demonstrated in their evidence an understanding of the law far beyond that of a lay person, and certainly beyond that of the defendants. He submitted therefore on this limb of the test, that the plaintiffs had failed to discharge the onus of proof that the agreement had been entered voluntarily.
132. Mr. Cross further submitted that the agreement was manifestly improvident. The plaintiffs are currently living rent free in the defendants property. They have not sought to enforce any contract for sale, but rather their case is based on a contention that they enjoy a lease under which they are permitted to live at no cost in the plaintiffs property for 15 years.
133. Finally, in relation to the third contract, Mr. Cross submitted that there was no evidence that this document was ever executed by the defendants. Both defendants denied having executed the document, and this evidence was confirmed by the evidence of Mr. Terence Casey, the defendants solicitor. Furthermore, it was clear from the evidence that contrary to the suspicions held by the plaintiffs, the defendants did not rely upon any third contract, executed or otherwise, to raise finance from Anglo Irish Bank for the Rathmore supermarket.
134. If the various submissions of the defendants were accepted, Mr. Cross submitted that the court was clearly entitled to make an order for possession in the defendants favour.
135. Mrs. Herron submitted that there was the necessary note in writing sufficient to satisfy the requirement of Section 4 of Deasy’s Act. The original agreement made in April 1999, was varied orally in November 1999 when the defendants withdrew from the purchase of the plaintiffs property in Sunday’s Well. The variations were to the effect that the plaintiffs would remain in occupation of the defendants property under the 15 year lease, pending their purchase of the property to which the plaintiffs remained committed. The plaintiffs would pay to the defendants the sum of £6,000 for their occupation of the premises, such sum to be paid when the plaintiffs succeeded in selling their own property and closed the purchase of the defendants property.
136. Alternatively, if the formalities of Deasy’s Act or other legal requirements had not been complied with, the plaintiffs were entitled to an equitable lease under the rule in Walsh -v- Lonsdale [1882] 21 Ch D9. Alternatively, the plaintiffs were entitled to an equitable lease under and by virtue of the doctrine of part performance.
137. It was submitted that the alteration in the third contract of the purchase price from £214,000 to £220,000 was sufficient to satisfy the statutory requirements as to written form. Par 21 of Mrs. Herron’s written submissions sets out the various grounds relied upon in support of the contention that the amended leasing agreement was fully and adequately supported by part performance.
138. Mrs. Herron further invited the court not to hold that the April 1999 document created a licence. At par 28 of her submissions she refers to different types of licence, suggesting that the instant arrangements fall into none of the recognised categories. Further, by issuing a notice to quit and ejectment proceedings, the defendants implicitly conceded that a tenancy had been created.
139. Mrs. Herron’s submission on undue influence, though considerably more detailed than that submitted by Mr. Cross, did not differ as to the essential legal requirements. She submitted that there was no evidence of actual undue influence. She further submitted that there was no exclusive relationship between the parties resulting in the defendants placing trust in the plaintiffs so as to give rise to a presumption of undue influence. Alternatively, Mrs. Herron submitted, the evidence showed that the transaction was a free exercise of the defendants will and, in any event, no substantial benefit was obtained by the plaintiffs under the transaction. (Carroll -v- Carroll [1998] 2 ILRM 218). Alternatively, the defendants had forfeited any right to relief by delay and approbation.
140. In relation to the third contract, Mrs. Herron submitted that there was a concluded oral contract between the parties to sell the property to the plaintiffs in October 2000. It was accepted that the contract to purchase sent to the plaintiffs solicitor contained a clause that no contract would come into existence unless and until the contract to purchase was signed by the defendants. However, the defendants intention to sell their property to the plaintiffs had been their intention since April 1999 and the decision to engage professionals to draw up the contract to purchase was a legal requirement and formality which was not made with the intention of changing the terms of the contract in any way. It had been the plaintiffs belief that the defendants had executed this third contract, but even if they hadn’t, there were sufficient acts of part performance apparent from the evidence to enable the court to hold that it was effective and binding.
Conclusions
141. The Court has formed the most definite view in this case that the relationship between the plaintiffs and the defendants was at no stage a relationship between equals. On the contrary, the evidence clearly establishes that when the plaintiffs first met the defendants in August 1998, the plaintiffs were an experienced duo specialising in paralegal and litigation work, both on behalf of others and on their own account. Mr. Ó Siodhachain was a well known figure in the locality, both through his political, paralegal work and writings. Mrs. Herron, as both her personal and academic history and indeed her conduct of this case shows, is a woman with not only considerable experience of the law, but also is possessed of sharp mental skills and significant experience in contesting problems over a wide spectrum of issues.
142. By contrast, Sean O’Mahony left school at 16 years of age and has limited educational achievements. He is also to some degree handicapped as a result of injuries sustained in 1983 and visual difficulties which have left him with impaired eyesight. The evidence in the case also satisfied me that Sean O’Mahony is a person of considerable immaturity who, in 1998, had no clear or well thought out concept for his future life and that of his family. He was also clearly very much under the influence of his parents and acted, in the words of the plaintiffs, like a 15 year old. Throughout the hearing, the court had the opportunity of observing the demeanour of all the witnesses both in direct and cross examination. The Court witnessed the emotional collapse of Mr. O’Mahony at one point during the giving of his evidence, an event which required a short adjournment, and was ultimately left in no doubt and I do hereby find that Sean O’Mahony was at all relevant times an immature, emotionally underdeveloped and easily manipulated individual of limited intelligence. Insofar as his wife Geraldine is concerned, the evidence establishes to my satisfaction that she found the interference of her husband’s parents difficult to put up with, that it caused difficulties between herself and her husband at times, that she felt isolated and vulnerable and that these difficulties were all exacerbated following the introduction of the plaintiffs into their lives.
143. It is not necessary for me to find a particular number of days or dates upon which the plaintiffs visited the defendants during the period August 1998 – April 1999. I am more than satisfied on the evidence and hold that over that period the plaintiffs intervened in the lives of this young couple in a manner which was totally inappropriate for persons who had in mind purchasing the defendants property. I do not accept that these interventions were, as suggested by the plaintiffs, altruistic. They were, in my view, entirely designed to mould the defendants to the plaintiffs intention which was to secure the defendants property at Ballybeg on the best possible terms. In reaching this view, I am paying particular regard to the actions of the first named defendant in advising and recommending that Sean O’Mahony consult a psychiatrist, in arranging a particular psychiatrist whom he should consult with, and in suggesting questions for Mrs. O’Mahony to discuss with Dr. Kinsch. I accept in full Mrs. O’Mahony’s account of Mr. Ó Siodhachain behaviour during the period August 1998 – April, 1999. I further hold that Mr. Ó Siodhachain encouraged Mrs. O’Mahony to take steps and adopt life style behaviour with the object and intent of driving a wedge between herself and her husband. I do not say that the involvement of the plaintiffs was such as to amount to “brain washing” of the defendants or either of them, but, during the period August 1998 – April 1999, the plaintiffs infiltrated the lives of the defendants to such a degree, and from such a position of comparative strength, as to further imbalance an inequality of negotiating position between the parties which was present from the outset. In particular, I accept the defendants evidence that when they sought to have professional guidance in relation to the purchase of the Sundays Well property, that they were put off this idea by the plaintiffs. I further find and hold that at no stage up to and including the date of execution of the first document did the defendants have the benefit of independent legal advice. I further hold that on the evidence they were encouraged not to seek such advice and that the first named defendant made the representations described by the defendants as to the “facilitatory” nature of the first document and that he told them it was not worth the paper it was written on. At the time therefore of the execution of the document in April 1999, I hold and find that there was a relationship of confidence and trust reposed by the defendants in the plaintiffs, although I will also deal with the issue of actual undue influence in this case in due course.
144. I will now turn to the issues.
145. I accept Mr. Cross’ submissions in relation to the document executed in April 1999. It is quite clear that what this document envisaged was an exchange of properties by means of sale within a specified period. I am satisfied the reference to a “lease” in the document was not designed to create a lease as such but was intended rather to provide some sort of legal basis for occupation of the respective properties between the date of the document and the closing date on the 8th December 1999. It cannot in my view be regarded as a lease, because it fails to specify any rent. Further, I do not accept that this document was varied in any specific way by any agreement in November 1999 when the defendants withdrew from the Sunday’s Well purchase. I find it inconceivable, having regard to the meticulous way in which Mrs. Herron fastens upon and records such matters, that such an agreement, if made, would not be reflected in the second or third contracts, or in some other documentation or correspondence between solicitors. While Mrs. O’Mahony in cross examination may have said that she believed an offer of £6,000 was at some point made in respect of rent, Sean O’Mahony stated that the £6,000 in question was an adjustment to the purchase price to reflect the increase in value of Ballybeg between the date of the original document in April 1999 and October 2000. I prefer Sean O’Mahony’s evidence on this point, supported as it is by the singular absence of any other written record of some such supposed variation of the April 1999 document.
146. In my view the arrangements between the parties fell through completely as of December 1999, following which the plaintiffs were allowed to remain on as permissive occupants of the property against a background where both sides hoped the plaintiffs would produce the purchase moneys to complete the acquisition of the farm at Ballybeg.
147. I also accept that where contradictions appear in the document of April 1999, they must be construed against the plaintiffs who prepared them. The plaintiffs in evidence themselves accepted that the document should not be construed as conferring a rent free facility to the plaintiffs to live on the defendants farm for 15 years. In just the same way as the description of a tenancy arrangement as a licence cannot convert a lease into a licence, the converse seems to me to be equally true, namely, that the description under the name of a ‘lease’ of a licence or caretakers agreement cannot operate to convert a permissive occupant into a tenant where all the usual characteristics of a leasing agreement are absent. In the instant case, there is no mention in the April 1999 document of even a single covenant, such as would characterise a lease. (Gatien Motor Co -v- Continental Oil Co. [1979] IR 406).
148. Nor do I accept Mrs. Herron’s submissions that any deficiencies in legal form can be compensated under the equitable doctrine of part performance. The evidence overwhelmingly establishes that at no time were the plaintiffs ever in a position to complete the purchase of the Ballybeg property, nor did they either pay rent or any portion of the purchase moneys. As the evidence shows, a number of judgments have been obtained against Mrs. Herron during the period up to November 1999 which, because they were unsatisfied, led to judgments being registered against her property in Sunday’s Well. She had in addition by mid 2000, borrowed £35,000 from Geraldine O’Mahony, a liability she acknowledged herself in evidence. This inability to at any stage complete the transaction does, in my view, effectively put paid to any suggestion that the doctrine of part performance can be relied upon in any way in this case. Nor in my view do the plaintiffs come to court with clean hands as my findings make clear.
149. The rule in Walsh -v- Lonsdale seems to me to have no application on the facts as found by me in the instant case. This doctrine was developed to provide for the enforcement of an informal lease for valuable consideration by applying the maxim “equity regards as done what ought to be done”, whereby the parties would be treated in equity as being in the same position from the beginning as if a proper formal lease had been executed. This situation usually arose where there was no adequate note or memorandum in writing of an agreement, but where there were sufficient acts of part performance to take the case out of the Statute of Frauds. However, it almost goes without saying, that the parties must have intended to create a lease, which I have found was not the fact or intention. Even if I am mistaken in this respect, the doctrine is in any event dependent upon the availability of the remedy of specific performance in the particular case, which is a matter within the discretion of the court. If the remedy is not available on the facts of the particular case, the doctrine cannot apply. I have already set out the reasons which coercively persuade the court that it should not exercise its equitable jurisdiction in favour of the plaintiffs in this particular case.
150. I propose to deal with the issue of undue influence, lest it be held elsewhere that the document executed in April 1999 has the effect contended for by the plaintiffs.
151. In my view there was actual undue influence in this case. As already mentioned, the court regards it as totally inappropriate for an intending purchaser to have interfered and intervened to such a degree, as occurred in this case, in the lives of the parties from whom it was intended to purchase a farm and property. I am satisfied from the evidence that Mr. Ó Siodhachain did endeavour to drive a wedge between husband and wife, so as to make Mr. O’Mahony more malleable in the terms he would seek for the sale of the family farm. I am satisfied he completely won over Geraldine O’Mahony, who seems to have followed his every advice and suggestion, to the extent of following practical philosophy courses in Killarney and collaborating with Mr. Ó Siodhachain in formulating questions to put to Dr. Kinsch about her husband’s behaviour on the occasion when Dr. Kinsch was due to visit the family farm. It is important to note that the making of the agreement in April 1999 was preceded by a letter from Mr. Ó Siodhachain to the O’Mahonys threatening to make them responsible, not only for rents incurred by the plaintiffs if they could not immediately move into Ballybeg, but holding them responsible also for any other loss of income which Mr. Ó Siodhachain might suffer as a result. These threats must be seen in context. By this time, the plaintiffs had insinuated themselves into the lives of the defendants over a period of months and I am satisfied were regular visitors to the defendants home at Gneegevuilla. I also accept the description in evidence given by both O’Mahonys as to how the plaintiffs won them over and, in certain respects, instilled a fear into them as regards the possible consequences of non co-operation with the plaintiffs. The letter written on the 10th of April can only, in my view, be seen as the severest form of pressure on the defendants to co-operate with the wishes of the plaintiffs or face those consequences.
152. I am also satisfied from the evidence that on the night of the all night discussion, the plaintiffs arrived in a brisk and business-like manner, quite determined to conclude matters. There is no dispute or argument about the fact that the parties sat up all night until 6 am before agreement was reached. It is hard to imagine a less satisfactory manner of negotiating to conclusion an important event in the lives of the O’Mahonys than this. The plaintiffs were obviously aware that the defendants did not have the benefit of legal advice in relation to the matters under discussion on the night in question. I do not accept the evidence of the plaintiffs that they recommended to the defendants that they seek and obtain such advice. Instead I prefer the evidence of the defendants that they were advised not to seek legal advice, and that they were content to go along with this based on representations made by Mr. Ó Siodhachain that the document “was not worth the paper it was written on”.
153. I think it more probable that in relation to the date of signing by the parties, that the evidence given by the plaintiffs may be more accurate. In other words, I accept that the document had to have been typed up following the all night meeting, that it had to be re-presented to the defendants when that had occurred. However, it seems to me to make absolutely no difference to the issue I have to determine, given the absence of independent legal advice prior to the execution of the agreement.
154. I am also satisfied that this agreement was an extremely improvident one from the point of view of the defendants, as subsequent events have all too clearly demonstrated. To the extent that the lease may be considered valid, thereby creating a rent free 15 year occupation of the defendants farm by the plaintiffs, it is difficult to imagine more a catastrophic outcome from the defendants point of view. The distress of the defendants, which was all too apparent during the hearing before me, can only have been compounded as increasing financial pressures came on them from banks and other lending institutions while the plaintiffs continued to fob them off with promises of completing the purchase which never materialised. It follows from the findings I have made, that I do not need to consider the alternative basis upon which the court may intervene, namely, that of presumed undue influence. It equally follows that if I am mistaken in my assessment of the witnesses and their evidence on the issue of actual undue influence, it is still open to me to hold, and I do so hold, that the onus of disproving presumed undue influence in the context of a relationship of trust, which I find to have existed, has not been discharged in this case by the plaintiffs.
155. It was urged upon the court to treat the delay in moving to set aside the April 1999 document as an approbation of the arrangements put in place in consequence. However, I am quite satisfied that the defendants continued under the influence of the plaintiffs throughout 1999/2000, a situation which was compounded by the severe financial pressure which came to bear on them from October 2000 onwards. Even on the plaintiffs own evidence, the defendants were at that stage desperate for money. Nonetheless, they did not, and I so find, disclose to their own solicitor the existence of the April 1999 document until all hope was gone following the passing of the final closing date in the third contract on the 15th day of March 2001. This non-disclosure in my view was a direct result of the influence exerted on the defendants by the plaintiffs.
156. I turn then to the issue in relation to the third contract, i.e. the contract prepared in October, 2000.
157. In this regard, I accept fully the evidence of Mr. Terence Casey to the effect that this document was never signed by either of the defendants, or by him on their behalf. I also accept his evidence that this document was never used by way of collateral or security for any lending institution, and in particular, was not used for the purpose of raising finance from Anglo Irish Bank. I accept his evidence that this document never left his office and I accept fully the reasons offered by him as to why that was so. I also accept fully his evidence that he first became aware of the April 1999 document some time in March, 2001, when he called his clients into the office to discuss the situation arising when the third contract was returned with a deposit of only £100. Again, on this point as to when Mr. Casey first learned of the existence of this document, the defendants themselves gave conflicting evidence, Mrs. O’Mahony agreeing with Mr. Casey, but Mr. O’Mahony stating, mistakenly in my view, that he believed this document had been mentioned to Mr. Casey some time in November/ December, 1999. I am satisfied that any error on this point by Mr. O’Mahony arose from the lengthy period which he spent in the witness box and the manifest distress under which he laboured while giving evidence.
158. Accordingly, I hold against the plaintiffs on this issue also.
159. This brings me finally to the defendants claim for possession.
160. When this matter was first aired before me in October 2001, I acceded to Mrs. Herron’s request to injunct and halt the District Court ejectment proceedings on very specific conditions. Those conditions included requirements that pleadings be exchanged within specified time limits and that discovery equally take place between specified time limits, all with a view to having the case moved forward to a list to fix dates in early 2002. I expressly stated at the time that I was doing so as an exercise in case management and with a view to having all issues determined in a full plenary hearing. Such a hearing has now taken place before this court, extending over a period of 5 days, some 3 days longer than the parties indicated to the court at the outset of the hearing.
161. In view of my finding that the plaintiffs occupied the defendants farm at Ballybeg as permissive occupants only, that entitlement to remain in occupation terminated following the demand made for possession by the Notice to Quit. While Mrs. Herron makes the point that the Notice to Quit refers to a tenancy from week to week, Mr. Casey explained in evidence that this was inserted merely because he saw it as the most appropriate way to deal with a permissive occupancy. While a very short period only was provided to the plaintiffs to vacate the property, the fact remains that they have not done so and continue to occupy and reside in the property, paying no rent, from May 1999 up to and including the present.
162. In my view, the demand made was adequate to terminate the permissive occupancy and I accordingly declare that the defendants are entitled to an order for possession of their lands at Ballybeg.
163. While the court heard evidence that a sum of £35,000 remains due and owing by Mrs. Herron to Mrs. O’Mahony, it was accepted by Mr. Cross that this sum, although undoubtedly due, forms no part of the defendants claim in the present proceedings and I am accordingly making no order in relation to that liability.
O’Siodhachain & Anor v. O’Mahony & Anor
[2002] IEHC 175
JUDGMENT of Mr. Justice Kearns delivered the 31st day of October, 2002.
This sorry saga has its origins in the desire of the defendants to sell all or portion of farmlands jointly owned by them and comprising about 70 acres at Ballybeg, Co. Kerry. The farm contains a dwelling house, a number of outhouses and sheds, various fields and is also in part bog land. The events giving rise to the present dispute between the parties arose following an unsuccessful public auction to sell the farm which took place on the 14th day of August 1998.
The defendants are a married couple with two young children who married in 1988. The first named defendant was born in or around 1966 and his background was in farming. He left school at 16 years of age. The farm had previously been in the ownership of Sean O’Mahony’s family, but had been transferred to the defendants, subject to a right of residence in favour of Sean O’Mahony’s parents. Prior to the auction in 1998 arrangements had been agreed between the defendants and the O’Mahony parents whereunder the O’Mahony parents would waive their right of residence if the farmhouse was sold, subject to being relocated at the defendants expense.
Following their marriage, the defendants had initially lived in the O’Mahony farmhouse at Ballybeg, but in 1992 moved to the nearby village of Gneeveguilla, where, up to and including the time of the auction, they lived in what had formerly been Geraldine O’Mahony’s family home, which in addition had a small grocery shop and a number of petrol pumps.
Sean O’Mahony had been involved in a road traffic accident in 1983, following which he found it difficult to carry out farming work on the farm at Ballybeg. He also had some visual disability. In 1998, he and his wife were keen to sell off the farm and to move out of the area altogether. It was their intention at the time to place the proceeds of sale of the farm in an investment property in Dublin.
At the auction, the property was offered in different parcels, but neither the farm as a whole or the different parcels attracted any offers or any worthwhile interest. Later that evening, however, and without prior appointment, the plaintiffs arrived at the farmhouse and there spoke with Sean O’Mahony’s father, indicating some degree of interest in the property. On that occasion, Mr. O’Mahony Snr. showed the plaintiffs around the farmhouse, and the yard and outhouses. A phone call was made to the defendants at Gneeveguilla to inform them that the plaintiffs were on the property and some days later the first meeting between the plaintiffs and the defendants took place.
The plaintiffs jointly operate as Paralegal Technical Allied Services, which was set up in the mid 1990s to provide assistance to people with legal difficulties. The services consist not merely of giving assistance in getting litigation organised and assembling paper work for that purpose, but in counselling clients and providing assistance to people and families with social or other problems. The evidence in the case indicates that during the period from August 1998 to March 2001, the plaintiffs were involved in investigative work in Donegal, were assisting various litigants in court cases both in Dublin and at different country locations and were also engaged in litigation on their own account.
Apart from his paralegal and litigation activities, the first named plaintiff is a political activist and author and producer of cultural and other works. He is a well known figure in the Kerry area.
The second named plaintiff was born and educated in Scotland and obtained a BA Honours degree in Paisley. She read for an MA in England. She qualified as a secondary school teacher and came to Ireland in 1982 where she did a FAS retraining programme in UCC. Thereafter she worked with AnCO, teaching people how to set up in business. She became interested in legal work following the breakdown of her marriage in 1986 which led to frequent court appearances for which she could not get legal aid. She started a BCL course in UCC in 1998 and was conferred with a BCL degree in September 2001. She completed her LLB studies in September of 2001 and sat entrance examinations for the Law Society in April/May, 2002.
In August 1998, the plaintiffs were living in rented accommodation in Scartaglen, Co. Kerry, a property which they had to vacate by April of the following year. Mrs. Herron was also the owner of a terraced house at Sunday’s Well in Cork, which had been vacant for a number of years and which was owned subject to a mortgage in favour of Cork Corporation. There are also other burdens affecting this property to which I shall later refer.
While Mr. O Siodhachain was distantly related to Sean O’Mahony, and while Mr. O’Mahony knew of Mr. O Siodhachain by reputation, the parties were not directly or previously acquainted until they first met some days after the abortive auction.
As much of the subsequent events, and in particular the intent and motivation of the parties, is hotly contested, I propose at this stage to confine myself to a narrative of the matters which are common case and deal with the conflicts in the course of my review of the evidence given by the witnesses.
In the days and weeks following the auction, it is not in dispute that the plaintiffs called to the defendants’ shop at Gneeveguila where discussions of a general nature took place about the possible sale of portion of the farm to the plaintiffs. The plaintiffs interest was mainly focused on the farm house, its curtilage and outhouses, and a number of adjoining fields, which together formed a parcel of about 40 acres.
The plaintiffs took the view at a very early stage that the O’Mahony’s were a dysfunctional family, and that Sean O’Mahony in particular was very much dominated by his parents, who very quickly appeared to have formed a dislike of the plaintiffs and were extremely unhappy at the prospect of the defendants selling the farmhouse to the plaintiffs. Mr. O Siodhachain encouraged Mrs. O’Mahony to develop more independence on her own account and gave her books on practical philosophy and psychology to assist her in this regard. He encouraged her to attend a course in philosophy in Killarney, which she duly did. Mrs. Herron for her part formed a friendship with Geraldine O’Mahony and the two women commenced confiding in each other.
As the relationship between the parties developed, the plaintiffs offered their expertise to the defendants in relation to what might be done with the proceeds of sale of the farm at Ballybeg. At different times, the plaintiffs brought the defendants to view properties as far away from each other as Athlone and Tarbert. Projections and drawings were prepared and supplied by the plaintiffs, such as might put the plaintiffs in the best possible position to apply for loan facilities from a lending institution. Amongst the various proposals under consideration at different times were the extension of the shop premises at Gneeveguilla, the opening of a business in Tarbert and a supermarket project in Rathmore, Co. Kerry, which latter option the defendants ultimately opted to pursue in 2000. Apart from one set of drawings, for which a sum of £200 was paid to Mr. O Siodhachain, these services were rendered as a “gift” by the plaintiffs to the defendants.
Again, it is not in dispute that the plaintiffs took a very pro-active role in the defendants lives. Nor is it in dispute that Mr. O Siodhachain advised and arranged for Mr. O’Mahony to seek and obtain psychological help and counselling to help him overcome problems identified by the plaintiffs. In particular, Mr. O Siodhachain recommended that Mr. O’Mahony consult with Dr. Kinsch in Tralee, advice which was taken by Sean O’Mahony. It appears that a number of counselling sessions did take place in late 1998 or early 1999, following which Dr. Kinsch paid a visit to the defendants home at Gneeveguilla for further consultation and discussion with both defendants.
Shortly before Christmas, 1998, the defendants spent an evening with the plaintiffs at Scartaglen where a discussion took place about the viability of purchasing a property for letting purposes by creating apartments. It appears to have been on this particular occasion that Mr. O Siodhachain produced figures and projections in relation to Mrs. Herron’s property in Cork, which suggested that that property, if renovated and set in flats, might produce a better income then some of the other options under consideration, including the investment property in Dublin. The Sunday’s Well property was close to UCC and thus suitable for students.
Following this discussion, Mr. O’Mahony, apparently on his own initiative, went to inspect the property in Cork as did his wife. A number of visits to Sunday’s Well took place, but no surveyor, architect or engineer was ever retained on behalf of the defendants for the purpose of assessing what renovations might be necessary to the Sunday’s Well property or the likely cost of same. Nonetheless, the defendants, and in particular Mrs. O’Mahony, were enthusiastic about pursuing further the idea of acquiring the Cork property, which in turn led to discussions between the parties of a “back to back ” arrangement whereby the property in Cork might be transferred to the O’Mahonys in exchange for the defendants 40 acre parcel of land at Ballybeg, including the dwelling house, subject to some allowance for renovations to the Cork property..
Lengthy discussions then ensued between, in particular, Mr. O Siodhachain and Mr. O’Mahony, to see if mutually satisfactory terms could be arrived at These discussions also involved what use Mr. O’Mahony would make of the lands at Ballybeg even if transferred to the plaintiffs, and there were also lengthy discussions about machinery, use of outhouses and a penumbra of related issues.
On the 10th April 1999, the plaintiffs wrote to the defendants to say that unless the proposed purchase of Ballybeg was completed within 14 days, the plaintiffs would be obliged to rent accommodation elsewhere (their time at Scartaglen having expired) and would hold the O’Mahonys to account for any rent which they might incur in so doing.
There then followed an all night discussion between the parties at Gneeveguilla on the 23rd April 1999 which led directly to the execution of the written document which is the subject matter of these proceedings and which is hereinafter referred to as “the first contract”. This document was drawn up and prepared by the plaintiffs. It is not in dispute that the defendants obtained no independent legal advice prior to executing the same.
Under the first contract, the defendants agreed to purchase the plaintiffs property at Sunday’s Well in Cork and the plaintiffs agreed to purchase the farmhouse, outbuildings and about 40 acres of land, the property of the defendants at Ballybeg. The purchase price for the Sunday’s Well property was £374,000 and the purchase price for the lands at Ballybeg was £214,000. In addition, the defendants were to get the benefit of a sum of £95,000 to be spent on renovations on the Sunday’s Well property. The document further provided that purchase and sales contracts should be signed and exchanged as soon as practicable but in any event not later than the 8th December 1999.
In view of the dispute which subsequently arose between the parties, it is appropriate to set out verbatim those provisions of the document which related to the use and occupation of the lands at Ballybeg prior to the completion of any contract for sale. Firstly, the “preamble ” to the document recites the following:
This document is to set out the terms and conditions as agreed between all parties on Saturday April 23,1999 at Gneeveguilla, Rathmore regarding the sale and transfer of properties between both parties and such interim arrangements as are required to allow all parties the use and benefit of the properties and security for their interests in same prior to the signing of the sales and purchase contracts on or before the &11 December 1999, at which time this agreement will cease to have effect ”
The document later provided:
10. “to facilitate the renovation work in Sunday’s Well and to protect the interest of the purchasers and the moneys expended in the reconstruction, the vendors as set out in (1) of the foregoing will lease to the purchasers as set out in (2) of the foregoing the property in Sunday’s Well for a 15 year period.
11. To facilitate the occupation and renovation of Ballybeg the vendors as set out in (2) of the foregoing will lease the property as set out in (4) of the foregoing to the parties as set out in (1) of the foregoing.
12. The 15 year leases as set out in (10) and (11) of the foregoing will come into effect with the signing of this agreement and will remain in
force until superseded by the contracts as set out in the preamble.
13. It is agreed by all parties that the contracts for the sale and purchase of Sunday’s Well in Ballybeg properties be exchanged between the parties solicitors as soon as the renovations of the main residence of Sunday’s Well is complete or in any event not later than 5* December
1999.
17. Both parties agreed that this document will cease to have effect on the signing of the contract for both properties on or before the 8? December 1999.”
Following the execution of this document, the first named defendants’ parents were prevailed upon to vacate the dwelling house and move into rented accommodation. The plaintiffs moved into occupation of the defendants’ farmhouse in May 1999 and have remained there since. They have paid neither rent nor purchase moneys to the defendants.
In the months that followed, no work by way of renovations to Sunday’s Well was carried out, nor was any schedule of works prepared or agreed, nor was any expert or qualified professional retained to advise the defendants in any way in relation to Sunday’s Well.
In November 1999 the defendants asked the plaintiffs to be relieved of their obligation to proceed with the transaction insofar as the acquisition of the Sunday’s Well property was concerned. The plaintiffs agreed to this request. Without objection from the defendants, the plaintiffs continued to reside at Ballybeg. No renovations or works were carried out at Ballybeg.
In February, 2000, the defendants instructed their solicitor, Mr. Terence Casey, to prepare a contract for the sale of the farm at Ballybeg to the plaintiffs to the sum of £214,000. It was the agreed background position between the parties that a £1,000 deposit would be sufficient, it being recognised that the plaintiffs were not in a position to offer more at that particular time. The contracts were duly sent out and returned with a draft for £1000. This contract is hereinafter referred to as “the second contract”. This contract provided for a closing date some six months from the lllh February 2000. When on the return of the contracts signed by the plaintiffs Mr. Casey noted that a deposit of only £1,000 had been paid with a six month closing period he advised the defendants against proceeding further. For that reason that sale did not proceed and that document is not of itself an issue in these proceedings.
Throughout 2000, the plaintiffs made efforts both in Ireland and in the United Kingdom to raise the necessary funds to purchase the defendants’ farm. The defendants for their part remained willing to sell the farm to the plaintiffs, notwithstanding the history to that point. By mid 2000, the defendants had opted to purchase a supermarket premises in Rathmore and were themselves coming under increasing financial pressure to marshal the necessary funds both for the acquisition of the property and for the setting up of the business in Rathmore. The unchallenged evidence of Mr. O’Mahony was that the defendants paid the sum of £260,000 for the shop in Rathmore in which context they applied for and obtained loan advances of 20% of the purchase price from Anglo Irish Bank to buy, stock, and fit out the supermarket for business purposes.
Following this acquisition, the defendants instructed Mr. Casey to draw up another contract for the sale of Ballybeg to the plaintiffs (hereinafter referred to as the “third contract”). In this contract the purchase price for the defendants property is stated to be £220,000 with a deposit of £22,000 payable by the plaintiffs. This contract provided that the sale should be closed on or before the 15th March 2001. It further provided that the contract would not be binding on the vendors until such time as it was signed by them and that no contract for sale should be otherwise construed.
This contract was in turn sent back in amended form to Mr. Casey through the plaintiffs’ solicitors with a deposit of £100. Mr. Casey called the defendants into his office and advised them strongly against entering into the contract. While the second named defendant was keen to proceed, Mr. Casey said he would not act for the defendants if they insisted on going ahead. It is not in dispute that executed contracts were never returned to the plaintiff’s solicitor.
In early March, 2001, the plaintiffs called, without the knowledge of the defendants, to Mr. Casey’s office in Killarney. They sought an extension of the closing date in the third contract from the 15th March, 2001 for at least one month as they believed they could still sell the Cork property. Mr. Casey, who only agreed to the discussion on an “off the record” basis, felt a longer period of time would be required if no purchaser was immediately available, and there was no such purchaser, and invited the plaintiffs through their solicitor to write to him requesting an extension of time. It is not in dispute that at the particular meeting, the plaintiffs offered to waive their entitlement to enforce any claim they might have to the 40 acre farm if they got the dwelling house and yard. Following this meeting, Mr. Casey received a letter from the plaintiff’s solicitor and called his clients in for a meeting.
In the course of his discussions with his clients, he voiced his suspicions as to whether or not the plaintiffs were in a position to sell the property in Cork. He advised his clients to seek possession of their farm at Ballybeg and to move to eject the plaintiffs.
A notice to quit dated the 5th April, 2001 was served on the plaintiffs requiring them to deliver up possession on or before the 13th April, 2001.
District Court ejectment proceedings were commenced on the 30th April, 2001.
The proceedings and the issues
The present proceedings were commenced by Plenary Summons issued on the 29th August 2001.
In these proceedings, the plaintiffs claimed an injunction prohibiting the defendants from proceeding with the ejectment proceedings pending the determination of the present proceedings. An interlocutory injunction was also sought to restrain the first named defendant from harassing the plaintiffs or interfering with the Plaintiffs in their possession of the premises at Ballybeg pending the determination of the proceedings. The summons further sought a declaration that the document or agreement entered into by the plaintiffs and the defendant on the 28th April 1999 was a lawful and valid lease.
A statement of claim was delivered on the 5th September 2001, on which date the plaintiffs issued a Notice of Motion for an Interlocutory Injunction to restrain the first named defendant as hereinbefore stated.
A replying Affidavit of Sean O’Mahony was sworn on the 11th September 2001, following which Donal O Siodhachain swore an affidavit on the 26th September 2001, to which was added a supplementary affidavit of Patricia Herron on the 1st October 2001.
The matter came before this Court on the 22nd October, 2001 when the controversy between the parties was outlined in some detail. I decided that, in the interest of having all matters disposed of at the same time, to injunct the continuance of the District Court proceedings and to set rigid timetables for pleadings and discovery so as to facilitate the earliest possible plenary hearing of all issues.
Thereafter a defence and counterclaim were delivered on the 12th November 2001.
Before that time, Mr. Terence Casey, who had been named in the proceedings as a third named defendant, successfully brought an application before Murphy J. on the 2nd October 2001 for an order striking out the proceedings against him. This order was the subject matter of an appeal to the Supreme Court which dismissed the appeal of Mr. O Siodhachain and Mrs. Herron on the 6th December 2001.
Affidavits of discovery were sworn by Mrs. Herron and by Sean O’Mahony, including a supplemental affidavit of discovery sworn by Mrs. Herron on the 31st May, 2002.
On the 10th May, 2002, Mrs. Herron brought a further Motion for Discovery seeking further and better discovery as per her letter to Mr. Casey dated 13* March 2002. While this matter had been adjourned in the Master’s Court to a date subsequent to the commencement of the hearing before this Court, the same was dealt with during the course of the hearing before the Court as appears from the review of the evidence. On the 10lh May, 2002, the proceedings appeared in a list to fix dates before Kelly J. Having heard Mrs. Herron on that occasion, Kelly J. directed that the proceedings be listed for hearing on Tuesday the 18lh June 2002. The plaintiffs appealed the order of Kelly J. to the Supreme Court.
On the 18* June 2002 when the matter was listed before Kelly J., the plaintiffs again unsuccessfully applied to adjourn the matter and the plaintiffs then immediately moved an application in the Supreme Court by way of appeal, from the order of Kelly, J., which said application was refused by the Supreme Court.
The application for adjournment was renewed to this Court on the 18* June and was also refused.
Further applications for adjournments were made by the plaintiffs to this Court during the hearing of the proceedings before this Court. One application which was premised on a medical indisposition affecting Mrs. Herron was granted. Further adjournment applications, sought for the purpose of initiating proceedings against me as the trial Judge in the case, together with other defendants, was refused.
As appears from the Affidavit of Patricia Herron sworn herein on the 10* May 2002, the case had been put in to the list to fix dates first on the 11* January, 2002. At that time, it was put back to the next list to fix dates in March, 2002 when Mrs. Herron indicated to the Court that a date for hearing in April or May would not suit her as she had law exams during those months. As already stated, Mrs. Herron, notwithstanding this adjournment, sought the further adjournment refused by Kelly J. on the 10* May, 2002. As is acknowledged by Mrs. Herron in her Affidavit, the time limits specified by me when injuncting the continuance of the District Court proceedings included the requirement that the case should go into the list of fix dates in January 2002.
During the course of the hearing, I invited the parties to identify the real issues in the case. As appears from the Statement of Claim delivered by the plaintiffs, certain reliefs sought are in contradiction of each other. In the course of submissions, Mrs. Herron indicated to the Court that the plaintiffs were not placing any form of reliance on the second contract. They were however asserting their right to occupy and remain in occupation of the defendants’ farmhouse and lands at Bailybeg under and by virtue of the document dated 28th April, 1999, as varied by an alleged oral agreement between the parties made thereto when the defendants withdrew from the purchase of the Sunday’s Well property. In the alternative, the plaintiffs contended that a concluded and valid contract was made between the parties in October 2000.
Taking in to account the defence and counterclaim delivered in the case, the issues to be determined are as follows:-
(a) Is the document dated 28th April, 1999, effective to create a valid lease for the stated period of fifteen years or otherwise?
(b) If so, was the execution of the document in question procured by undue influence, or was the making of the agreement attended by
circumstances of oppression or unfairness which would require the Court to intervene to set it aside?
(c) Was there a concluded and valid contract made between the parties in respect of the lands at Bailybeg in September/October 2000?
(d) Are the defendants entitled to an Order for possession of the farmhouse and lands at Bailybeg?
The Evidence
The execution of the first contract not being in dispute, the Court ruled that the defendants should first give evidence in support of their contention that the making of the first contract was procured by undue influence or was otherwise attended by circumstances of oppression or unfairness which would warrant the intervention of the Court.
In reviewing the evidence, the Court will not again refer to those undisputed matters and events already outlined which were established in the course of the evidence, but will rather concentrate on those areas where conflicting evidence was given.
Sean O’Mahony told the Court that in 1998 the defendants had decided to sell their 70 acre farm with a view to raising money for investment purpose. He also had in mind moving out of the area altogether.
He only knew Mr. O Siodhachain by repute although he accepted there was a family connection. From the outset, Mr. O’Mahony felt the plaintiffs were trying to win over the trust of his wife and himself and from an early stage, he said, the plaintiffs virtually lived with them on a constant basis, offering all sorts of services, including the preparation of financial projections and plans for various business ideas in which they sought to interest the O’Mahonys. Mr. O’Mahony informed the Court that he was led to believe that the plaintiffs could do any legal work in respect of any sale of the property for nothing if the property was sold to them.
After a while, aspects of the relationship with the plaintiffs began to disturb Mr. O’Mahony. He felt they were driving a wedge between himself and his wife, saying, for example, that Sean should be operating the pumps outside the shop operated by his wife at Gneeveguilla, rather than sitting around while his wife did such work. The plaintiffs, according to Mr. O’Mahony, suggested openly that Sean was very manipulated by his parents.
Mrs. Herron suggested to Mr. O’Mahony that there were unhappy differences between Mr. O’Mahony and his wife which had led in 1992 to Geraldine leaving their home in Ballybeg without him to go back to her family home at Gneeveguilla with her baby. Mr. O’Mahony stated that they had both gone to Geraldine’s family home with their child in 1992 because her father was extremely ill at the time and required care and support. He did however accept that part of the reason was that Geraldine did not get on too well with his parents. Mrs. Herron pressed Mr. O’Mahony to accept that he was a person prone to depression, that he spent days on end in bed, both before and after the time when she and her co-plaintiff met with him. Mr. O’Mahony agreed that his parents interference did get him down at times, but not to the point where he ever needed to spend time in bed or require medical or psychiatric help. He accepted suggestions from Mrs. Herron that his parents demanded to know the reason on every occasion where Sean sought to use the family car and required him to account for the mileage.
Mr. O’Mahony stated that he had received psychiatric counselling from Dr. Matt Kinsch in Tralee some months after first meeting the plaintiffs. This was Mr. O Siodhachain’s idea. He had also seen some other counsellor whose name he could not recall. The psychiatric advice he had received was to have no further dealings with Mr.O Siodhachain.
He was challenged on his assertion that the plaintiffs “lived” with the O’Mahonys, that the plaintiffs were away a lot of the time on other unrelated business. Mr. O’Mahony agreed that this was so, but pointed out that he and his wife had travelled to Donegal with the plaintiffs and visited a number of properties with them.
Mr. O’Mahony stated that some months after first meeting with the plaintiffs, they indicated they had a property in Cork that might be a more suitable alternative investment opportunity. He wasn’t interested, but felt his wife Geraldine was very much won over. Some time after Christmas 1998 he went to look at the property which was located in Sundays Well in Cork. He felt it was in a very poor condition having been vacant for a long time. He said that Mr. O Siodhachain had suggested swapping the farm at Ballybeg for the plaintiffs property in Cork, subject to some allowance for renovations to the Cork property. This was with a view to making the Cork property fit for letting in flats. Mr. O’Mahony told the Court that he wished to have an accountant, engineer and solicitor look at the proposal, but the plaintiffs, having initially agreed to this approach, changed their minds and suggested instead that they would put the O’Mahonys in touch with solicitors of their nomination. In the event no surveyor, architect or engineer ever looked at the property on their behalf.
Mr. O’Mahony went on to describe the events which took place in the dwell inghouse at Gneeveguilla on the night of the 23rd April 1999. On that night, he said that without prior arrangement the plaintiffs called and the parties then sat up all night discussing the proposed deal to be made. His recollection of the leasing arrangement was to the effect that Mr. O Siodhachain had mentioned a 99 year lease as being effective as a means of avoiding tax. There had been no mention of any rent in respect of leases on either property. However, when the plaintiffs later that same day came back with a written document in which there was reference to a 15 year lease he asked about it and was told not to worry, that it was for “tax purposes” only. He told his own counsel that it was his understanding that if contracts were not exchanged by the 8lh of December 1999, then the whole transaction would fall through. He also said that Mr. O Siodhachain had often said to him that the document wasn’t worth the paper it was written on. He did not accept in cross examination that the document was only signed by the parties on the 28th of April 1999. He further stated that when it was signed on Sunday 24lh, he was told by the plaintiffs not to discuss the document either with Mr. Casey, the O’Mahonys solicitor, or anyone else. He denied that the document had been left with himself and his wife for some days for their careful consideration or that they had been advised to discuss the entire matter with his solicitor, or some other solicitor.
The first written version of the document was seen by him on Sunday evening. It was then when he signed it and he recalled changing the figure in respect of renovations on the Cork property from £75,000 to £95,000.
When the document had been executed, he arranged for his parents to move out of the dwellinghouse to rented accommodation. Under the new arrangements worked out with the plaintiffs, he retained use of certain outhouses and a workshop on the lands. Mr. O Siodhachain worked some of the fields, cutting and baling hay which, according to Mr.O’Mahony, was left in the fields and needed to be removed by Mr. O’Mahony. Later by agreement, Mr. O’Mahony, let the fields and the plaintiffs occupation of the disputed property was confined to the house and surrounding curtilage.
Before the year was out, Mr. O’Mahony told the Court that his wife and he had decided they no longer wished to proceed with the purchase of the Cork property, because they wished to purchase a supermarket in Rathmore. The plaintiffs had no objection to their withdrawal, because at that time no renovations had been carried out to the Cork property and Mr. O Siodhachain said that the Cork property was now more valuable than it had been at the time of the execution of the document in April 1999.
Despite the fact that the original transaction was now at an end as far as Mr. O’Mahony was concerned, he nonetheless went to see his solicitor, Terence Casey, in January or February 2000 to get him to draw up a contract for the sale of the farm at Ballybeg to the plaintiffs for the sum of £214,000. He told the Court he did not inform Mr. Casey about the document which had been executed in April 1999. However, at another point in his evidence he stated that he may have mentioned the April 1999 document before December of that year when Mr. Casey asked for details of the title to the Sundays Well property. In any event, the second contract fell through when Mr. Casey advised against proceeding further.
In the year 2000, Mr. O’Mahony stated that he and his wife were keen to purchase a supermarket premises in Rathmore. They were still willing to sell to the plaintiffs, who kept promising they would come up with the money. They were dealing with Anglo Irish Bank in relation to the financial arrangements for the acquisition in Rathmore. He borrowed 220% of the purchase price of £260,000 for the property. This involved monthly repayments to the bank of £5,000 – £6,000 which was a huge financial burden for them. It was at this time that the third contract came into being. Mr. O’Mahony accepted that before it was drawn up he and his wife had first asked the plaintiffs for a letter of intent to purchase the farm at Ballybeg in the hope that the letter might be sufficient to persuade some financial institution to advance money. However, Anglo Irish Bank was not content to accept the letter. The third contract was then issued by Mr. Casey at the defendants suggestion. This provided for an additional £6,000 to the purchase price which, according to Mr. O’Mahony, was to reflect the increase in value in the farm, and had nothing to do with rent for use or occupation, as was suggested to him by Mrs. Herron. He denied that he had signed or executed this document, or that it was used by way of collateral or security for the Anglo Irish advance. Mr. O’Mahony stated that, apart from the supermarket title itself, various sites on his farm had been offered as collateral to Anglo Irish. The purchase of the supermarket and the move to Rathmore took place in November 2000.
Mr. O’Mahony said he was aware that in March 2001 the plaintiffs had gone directly to their solicitor with a view to extending the closing date on the third contract to the end of May. However, the problem was the plaintiffs were never able to come up with the necessary moneys to close. When the third contract came back with a deposit of only £100, Mr. Casey would not accept that they should proceed.
Mr. O’Mahony was also cross examined by Mr. O Siodhachain who suggested that Mr. O’Mahony had a great deal of experience in assessing building projects and dealing with tradesmen and other business people. Mr. O’Mahony agreed. Mr. O Siodhachain suggested that Mr. O’Mahony was perhaps not as incompetent or helpless as he had made out before the Court.
Geraldine O’Mahony told the Court that from the time of the first meeting with the plaintiffs that the plaintiffs virtually “lived with them” in Gneeveguilla. Mr. Ó Siodhachain was interested in buying the dwelling house on the farm and had all sorts of plans for extensions to the house which would accommodate his published works and legal cases. She described in some detail the months which led up to the all night meeting in April, 1999. In the talks which took place between the parties, Mr. O Siodhachain gave her to understand that she was been manipulated by her husband and that she had no control in the family unit. He also came up with the idea that Sean her husband should go for counselling. There was a first counsellor and then Dr. Kinsch, both of whom were nominated by Mr. O Siodhachain. She was asked if she had told Mr. O Siodhachain that Dr. Kinsch had advised her husband to “grow up “. Mrs. O’Mahony stated that the advice given to her by Dr. Kinch was that her husband should side more with his wife, even though he was an only son. She added that Dr. Kinsch had also advised that the O’Mahonys should altogether eliminate the plaintiffs from their lives.
She told the court that Mr. O Siodhachain had advised her to, “wake herself up “. She said that Mr. O Siodhachain advised her that both he and Mrs. Herron had come into their lives as “a sign from God” that they were there to help them. Mr. O Siodhachain led her to believe that if she did as he urged, everything would be fine in their lives. She believed everything he said and the extent to which Mr. O Siodhachain’s advice was followed caused a rift between her and her husband which was a mistake she would regret for the rest of her life. Mr. O Siodhachain pressed the witness about the visit paid by Dr. Kinch to the O’Mahony family home. Mrs. O’Mahony stated that the plaintiffs had in advance listed questions for her to put to Dr. Kinch about her husband, but denied the suggestion that, in the aftermath, of the visit, she told Mr. O Siodhachain that her husband had been left with “no cover” and would have to do whatever was suggested of him at that stage.
Both plaintiffs challenged Mrs. O’Mahony on her assertion that they virtually “lived” with the O’Mahonys. It was put to the witness that Mr. O Siodhachain and Mrs. Herron were either in Dublin for litigation purposes or in Donegal during the months in question between the auction and the signing up of the first contract in April, 1999. It was also put to the witness that Mr. O Siodhachain was busy during these months in political activity on behalf of Martin Ferris of Sinn Fein in Kerry. Mrs. O’Mahony accepted that the plaintiffs were actively involved in these different ways, but they still found lots of time to be calling on the O’Mahonys. She gave an example of how this might operate. On occasions where Mr. O Siodhachain might be in Dublin for one of his court cases, he could still call to the shop later on the same day. He often came with stories of court cases which he felt were designed to put the fear of the law into herself and her husband so that they would be afraid to such a degree that they could never stand up in court against the plaintiffs. She told the Court that Mr. O Siodhachain claimed to her that he could control the Court process by getting cases adjourned again and again and that he could “put a judge in his place “. As his cases were so often adjourned in this way, he could be back in Mallow by train in the afternoon, following which he would turn up at the defendants home.
In relation to the first contract, Mrs. O’Mahony recalled a particular evening in April 1999 when the all night discussions took place. On this occasion, the plaintiffs arrived without prior arrangement and were very business-like and brisk. Contracts were produced, she said, “out of the blue,”. Although there had been much talk of selling the farm, neither she or her husband were ready for this and both stated that they needed their solicitors advice and that they would not sign without it. However, the discussions went on all night and the contracts were eventually signed, as far as she was concerned, at 6 o’clock on Sunday morning. Again, as far as Mrs. O’Mahony was concerned, the contracts, whether in draft or typewritten form were not left with herself or her husband for even one day.
She told the Court that later that year, following a consultation with their accountant in Killarney, the O’Mahonys decided not to buy the property in Sundays Well. She continued to hope that the plaintiffs would come up with the necessary funds to buy the farm at Ballybeg by selling Sundays Well themselves. In the meantime, the plaintiffs kept coming up with new plans and projects for the O’Mahonys as suitable investment vehicles for the proceeds of any sale. Some of these plans and projections were drawn up by way of gift, others she paid for at £200 a time. At one point, she said, Mr. O Siodhachain wanted 1% of the overall figure if moneys were advanced from the bank in respect of the supermarket project at Rathmore.
In relation to the second contract, Mrs. O’Mahony stated she had already given cash to Mrs. Herron, out of which she believed the £1,000 deposit was paid. She had advanced moneys to Mrs. Herron, because she believed the plaintiffs did not have any money at that particular point in time.
When the opportunity to buy the supermarket in Rathmore came up in 2000, she was still of the view that she would give the plaintiffs a chance to come up with the money to buy the farm at Ballybeg. This was the reason why the third contract was sent out in October 2000. At this point, Mrs. O’Mahony told the Court, that she and her husband were desperate for money, that they were being pressed by suppliers and banks, all calling for payment.
Asked why she would give £1,000 towards a deposit to purchase her own property, Mrs. O’Mahony stated that in fact over the term of her acquaintance with Mrs. Herron between 1998 – 2000, she had in fact given to Mrs. Herron sums of money amounting to about £30,000.
Despite the collapse of the second contract, Mrs. O’Mahony told the court she still wanted to give the plaintiffs a chance to come up with the money even though she had begun to distance herself from the plaintiffs because of her worries about their difficulty in completing the purchase. She accepted the third contract came into being because Anglo Irish Bank would not accept a letter of intent to purchase the farmhouse from the plaintiffs. The bank required a signed contract. She did not recall any discussion about the amount of the deposit on this occasion. Her belief was that the contract specified a 10% deposit, something around £22,000. She denied that she had agreed that a deposit of £100 would suffice. She equally confirmed that she did not sign the third contract, that Mr. Casey would not permit it. This document was never produced or offered to Anglo Irish Bank by way of security. Instead, other sites from the O’Mahony farm were provided, along with the title deeds to the supermarket premises in Rathmore, as security for the loan which was advanced. Mrs. O’Mahony further stated that she had informed Mrs. Herron that the third contract had not in fact been signed by the O’Mahonys, although she kept hoping the plaintiffs might find the money to complete the transaction. Mr. O Siodhachain had told her they hoped to get it from England. However, from the time they moved to Rathmore in November, her husband had been pressing Mr. O Siodhachain for the purchase moneys all to no avail. When the third contract fell through, Mr. Casey was only then informed about the document executed in April 1999.
It was put to Mrs. O’Mahony that the ejectment proceedings only began when Mr. O Siodhachain wrote a letter threatening legal proceedings to injunct her husband from threatening behaviour and conduct. The witness disagreed, although confirming they had received such a letter. She did not accept that her husband regularly fought with tradesmen and staff in their supermarket, or that he had a problem dealing with people. She accepted the suggestion put to her that her husband was not intellectually incapacitated in anyway.
Mr. Casey told the Court that he was the defendants solicitor. Some weeks after the auction he heard that people wanted to buy the farmhouse. In February 2000 he was told by the O’Mahonys to draw up a contract for sale. He was advised at that time that the purchasers might not be able to pay the full deposit, so when drawing up the contract, he inserted the purchase price of £214,000 but left the amount of the deposit blank.
The contracts came back with a draft for £1,000 from the plaintiff’s solicitor Mr. Enright. Because there was a six month closing date and because the deposit was so small, he felt it was very unwise for the O’Mahonys to enter into contracts and so advised them. They took that advice. He later received a letter from the plaintiff’s solicitor stating that his clients were not now entering contracts and to return the deposit which he did.
He had a number of calls from the O’Mahonys saying that the plaintiffs were still keen on buying and had a property in Cork to sell. Through his clients, he passed on request for inspection of the title to the Cork property. He himself was sceptical that the plaintiffs had a property to sell. He was never shown or furnished with the title to the Cork property.
He was asked in October 2000 by Geraldine O’Mahony to draw up a further contract, that Mrs. O’Mahony believed that the property in Cork could be sold and so they wanted to go ahead. He was aware that the O’Mahonys were under pressure for money having just bought the premises in Rathmore, a transaction in which he was involved as their solicitor.
He drew up this further contract, which had a purchase price of £220,000 and 10% deposit.
He later received a telephone call from the plaintiff’s solicitor saying that the deposit was too high and asking if it could it be reduced. He said it could within reason. The contracts came back in amended form with a draft for £100. He called the clients into the office and told them he could not have it on his conscience to allow them enter into these contracts. Mrs. O’Mahony was keen to proceed. He said he would not act. At this point, Mrs. O’Mahony realised how serious the situation was, so they left his office without signing and never did sign. The contracts he said, never left his office, nor were they ever used as security for financial loans.
This occurred in early March.
Very shortly afterwards, the plaintiffs called to his office without appointment. Mr. O’Siodhachain wanted an “off the record” discussion. The plaintiffs wanted an extension of the closing date from the 15th of March, 2001 for one month, as they believed they could sell the Cork property. He asked if they had a purchaser. They had not. He said that if the property could be sold within two months he would ask the O’Mahonys for an extension.
He then got a letter from the plaintiff’s solicitor, Mr. Enright, looking for the extension. However, the letter was not reflective of the conversation he had had in the office with the plaintiffs in that it touched on matters relating to planning permission for the Sunday’s Well property which he had never discussed with Mr. Enright. He called the O’Mahonys in for a meeting and told them that he was suspicious as to whether or not the plaintiffs were making any effort to sell Cork.
In the course of this discussion he learned that his clients had entered some sort of arrangement and signed some document in April, 1999. He was completely unaware of this document until then. As soon as he saw it, he advised his clients to seek possession.
Cross examined as to whether the third contract was used as security for the loan obtained from Anglo Irish, Mr. Casey produced a letter from Anglo Irish Bank setting out the terms for the proposed advance. Mrs. Herron objected that this document had not been discovered. The Court then indicated that this was an appropriate juncture to deal with the Motion for further and better discovery which had been adjourned from the Master’s Court to the present hearing. Having heard submissions from both sides, the Court determined that the plaintiffs were entitled to further and better discovery such as would include production of this particular document. All other reliefs sought in the adjourned Motion for further and better discovery were refused.
He was asked about the meeting which had taken place in his office in March, 2001 attended by the plaintiffs. He was asked if he agreed that the plaintiffs offered to waive their entitlement to enforce their claim to the forty acre farm if they got the farmhouse and yard. Mr. Casey agreed that this suggestion had been made. He further agreed that he had not relayed this information back to its clients because of the confidential nature of the discussion. He had no authority, he said, to vary anything that might have been stated in the contract document.
He was asked if he had returned the £100 deposit and if not, why not? Mr. Casey replied that the draft in question remained uncashed on the file. He was asked if he had any recollection of the lease arrangement being discussed at this particular meeting and said he did not.
He did not think the O’Mahonys had kept the details of the first contract purposely from him. They told him when they did eventually produce it, that they had been told by the plaintiffs that it was “not worth the paper it was written on”.
He accepted that he had not addressed the queries about the title to the Cork premises to the plaintiffs or their solicitor. His concerns had been channelled through the O’Mahonys. His concerns first arose at the time of the second contract, not because of the disclosure of the April, 1999 document of which he then knew nothing, but because his clients kept telling him that the plaintiffs intended closing the sale out of the proceeds of sale of the property on Sundays Well. He wanted to know about the Cork property and subsequently found out that Cork Corporation had the title deeds. In searches which he made in May, 2001 he discovered there were three judgment mortgages affecting the property. The first of these was entered on the 21st of March, 1997 in proceedings between N.I.B. and Patricia Herron in the sum of £2,672. The second was entered on the 25lh of April, 2000 in proceedings between A.I.B. and Patricia Herron in the sum of £9,100 and the third was entered or registered on the 26th of May, 2000 in proceedings again involving A.I.B. and Mrs. Herron, this time in the sum of £20,947. All included in addition sums for costs. The three judgment mortgages were registered on foot of judgments obtained against Mrs. Herron, the first in October, 1996 and the other two in November, 1999.
Mr. Casey was asked about the notice to quit and the procedures that had taken place at that time. As far as Mr. Casey was concerned, the notice to quit was served first, and then followed by a demand for possession. Asked why the notice the quit refers to a weekly tenancy, Mr. Casey said it was impossible to know from the first contract document what the basis of the plaintiff’s occupation of the farmhouse was, other than as permissive occupant. He assumed it was a week to week type of arrangement. He stressed that sites owned by the O’Mahonys were never put up as collateral for the sums advanced by Anglo Irish Bank, but that some of these sites were being sold to reduce the indebtness of the O’Mahonys to Anglo Irish Bank.
He could not recall whether at the meeting the plaintiffs had at one point offered to give up the house at Ballybeg within a reasonable period.
Mr. O Siodhachain gave evidence to the effect that he became aware of the possible sale of this farm from talk in the locality. On the night of the auction, he and Mrs. Herron went to the farmhouse and were shown over the farmhouse and yard by Sean O’Mahony’s father. He indicated he might be interested in the dwelling house and some of the old buildings. Some days later the plaintiffs met with the O’Mahonys. He only visited the farm at Ballybeg two or three times, although they did call to the defendants at their shop in Gneeveguilla. He insisted that a great deal of time was spent by both plaintiffs in Donegal and Dublin over the following months and he rejected suggestions that the plaintiffs virtually lived with the defendants.
He accepted a friendship and relationship did develop between the plaintiffs and the defendants. As part of the work he did with Mrs. Herron, he would get involved in counselling clients. In this instance, both he and Mrs. Herron had recognised there were grave problems affecting the O’Mahonys. Both were complaining about interference by in-laws. Mr. O’Mahony in particular was called to account for virtually everything he did by his parents and was being treated like a 15 year old. He formed the view that Sean’s behaviour was dysfunctional and immature and that he should see a counsellor. He recommended Dr. Kinsch to whom he had referred a number of other clients. He also recommended self help books to Geraldine and gave her guidance in relation to a course in practical philosophy, Which she pursued as a result. He told Mr. Cross that the various interventions he had made in the O’Mahony’s lives were made for altruistic reasons. He accepted he had supplied the name of an accountancy firm to the O’Mahonys and also a particular branch of the Bank of Ireland. He also had advised and arranged for Mr. O’Mahony to see a particular Harley Street specialist in relation to his visual difficulties. He accepted he had also advised the O’Mahonys on how to furnish their home at Gneegevuilla so as to make the best possible impression on any representative of a lending institution that might call out to discuss business with the O’Mahonys.
He accepted that the plaintiffs had prepared background paper work, including financial projections, for a number of projects which they had discussed with the defendants. One night before Christmas 1998 the O’Mahonys came to their home in Scartaglen to discuss a particular project or property. On that particular evening, Mr. O Siodhachain by way of example and illustration as to how an investment property could yield profit, showed to Mr. O’Mahony some projections he had prepared in relation to Mrs. Herron’s house in Sunday’s Well to give the defendants some idea of what might be necessary when approaching a lending institution seeking finance. Some time later he found out that Sean O’Mahony had gone to Cork to look at the property from the outside and was very enthusiastic about it Mrs. O’Mahony did likewise and both O’Mahonys came to the plaintiffs with a proposition that they would buy the Sunday’s Well property if the plaintiffs bought the farm.
In the months leading up to April 1999 discussions began on a back to back arrangement. These discussions took many weeks and at various times he wanted to be finished with the whole discussion because of Mr. O’Mahony’s attitude which kept stringing things out for weeks. Mr. Cross read to him the contents of a letter dated 10th April 1999, suggesting it contained a threat that unless the purchase of Ballybeg was completed within 14 days that the O’Mahonys would be held responsible for rented accommodation elsewhere should the plaintiffs move out of Scartaglen, together with other expenses which Mr. O Siodhachain might incur. Mr. O Siodhachain stated that Mrs. O’Mahony had asked for the particular letter so as to get her husband’s parents out of the dwelling house. They had dug in their heels after the auction and were now demanding a new house. Also, he said, Mrs. O’Mahony was getting hate mail locally. The letter was designed to bring that to an end, because it was something she could show around to her relatives to highlight the difficulty that the O’Mahonys would be in unless the deal went ahead. The only pressure applied arose from the fact that the plaintiffs had to vacate the property at Scartaglen.
Mr. O Siodhachain stated there were at least three longhand drafts of the first contract before the all night meeting at the end of April 1999. On that night, the plaintiffs brought the final draft in longhand with them. He told Mr. O’Mahony at the outset that things were going to be finalised that night or the matter would go no further. He agreed that discussions went on all night because they were discussing matters which were not dealt with in the document, such as plant and machinery and how various EC land schemes would affect the property.
The reference to a lease had been included in the draft and in the discussions, because he was aware from other work he had done that no bank or finance house would give money or grant a loan except on a 15 year lease. He denied that he ever said the document was not worth the paper it was written on, although his own solicitor, Mr. Enright, had told him later that he was not very happy with it.
Some days later a typed version of the document was presented to the O’Mahonys. Sean O’Mahony wanted to change the sum for renovations to the Cork property from £75,000 to £95,000. Mr. O Siodhachain agreed and offered this as the reason why the written amendment appears on the typed version of the document. The document was then left with the O’Mahonys for a few days. Mr. O Siodhachain told the Court that the plaintiffs urged the O’Mahonys to show it to Mr. Casey, but they did not want that. They then suggested to Mr. O’Mahony that he take it to some other solicitor. He told the Court he in fact mentioned the solicitor of a particular trader with whom Mr. O’Mahony had had business dealings with in Portlaoise. He told Mr. Cross, however, that at the time of signing up of the first contract, which he said took place on the 28th of April, he had not checked to see if the O’Mahonys had taken any legal advice in the interim from either Mr. Casey or any other solicitor.
Mr. Cross asked what the purpose of the 15 year lease would be in the context of a sale of the property. Mr. O Siodhachain stated that the first contract was “facilitatory” in the sense that if anything went wrong, both of the parties would be protected by the leases. Mr. O Siodhachain gave as an example the possibility of a car accident happening which might affect one or more of the parties. He also felt it could constitute a form of security to raise funds. It was not written in for tax reasons of any sort.
In November 1999 the O’Mahonys asked to be released from the Sundays Well transaction, something which he and Mrs. Herron were quite willing to do. In the discussions which then took place, a sum was agreed for rent up to the probable closing date. Mr. O Siodhachain stated that this was a round figure to cover the time from the commencement of occupation of the plaintiffs at Ballybeg until the loan which would enable them complete the purchase came through. Apart from this ” variation, Mr. O Siodhachain stated that the O’Mahonys were willing to confirm all the other arrangements in relation to the farm at Bailybeg insofar as the plaintiffs were concerned.
Mr. O Siodhachain stated he was aware the O’Mahonys needed money for their business plans, including the project at Rathmore in respect of which he had helped them with financial projections. Insofar as closing the farm deal with the O’Mahonys was concerned, Mr. O Siodhachain stated that he and Mrs. Herron tried to get funds from lending institutions. However, as neither of them had any conventional income, they could not raise this finance in Ireland. They therefore tried to secure the loan from a company in the UK which specialised in asset based loans. They were for all practical purposes approved for such an advance in 2000, but the foot and mouth epidemic put paid to those arrangements. At a later stage the application for funding from the UK was reactivated, but although the plaintiffs were approved in principle for a loan, the lending institution declined to advance funds in Ireland.
Insofar as the third contract was concerned, Mr. O Siodhachain stated that Geraldine O’Mahony was quite desperate because of financial pressure. She was anxious to have a contract executed for the purpose of obtaining finance. He had asked her if £100 was a sufficient deposit if the plaintiffs assisted in the execution of a third contract and she agreed. Even her own solicitor saw this deposit figure as ludicrous. Mr. O Siodhachain stated that the deposit figure was always intended to be £100 in the third contract, and not 10%, or £22,000, which insertion was amended by his solicitor.
After they executed the third contract, they kept phoning Mr. Enright to see if signed contracts had been returned. Mr. Enright kept saying that they had not come in yet.
Mr. O Siodhachain stated that the plaintiffs were concerned about the financial predicament which were the O’Mahonys were in. The plaintiffs felt they might be able to help the O’Mahonys by releasing the farm portion of the lands from the contract so that the O’Mahonys could in turn sell it and reduce their financial overheads. Against that background, he rang Mr. Casey and asked if he would meet with them, a proposal to which Mr. Casey agreed.
At the meeting, Mr. Casey said that the offer to not purchase the farm was really of no use, that no one would now buy the farm in the middle of a foot and mouth crisis. Mr.O Siodhachain stated that they also offered to vacate the dwelling house within a reasonable time. They also discussed the possible extension of the closing date in the contract, and Mr. O Siodhachain asked for one month beyond the 15th March deadline. Mr. Casey stated that more time would be required and asked if the plaintiffs would have their own solicitors write a letter to him seeking the extension in question.
In 2000, Mr. O Siodhachain stated that Mr. O’Mahony’s attitude changed and he became very two faced. Mr. O Siodhachain therefore stopped calling to Rathmore. After March 2001 Mr. O’Mahony resorted to threatening behaviour and was involved in a number of incidents. He kept opening and leaving open the plaintiffs gates and went through various outhouses and sheds without permission. He brought out the auction sign which had been put away and generally made a nuisance of himself with the plaintiffs. It was against that background that Mr. O Siodhachain had written a letter in early April threatening legal proceedings to injunct Sean O’Mahony from these activities.
Mr. O Siodhachain told Mr. Cross that he didn’t really know in any legal sense what a lease was. He accepted there was no mention of any rent in the first contract, because at that time the O’Mahonys were going to purchase the Cork property in exactly the same way as the plaintiffs were buying the farm at Ballybeg. Once the back to back arrangements ceased to exist, Mr. O Siodhachain accepted that some rent would have to be paid in respect of their occupation of the farm. He could not say why this sum for rent if agreed and identified as such was not mentioned or included in the second contract or described as such in the third contract
Mrs. Herron told the Court that from August 1998 onwards she spent a great deal of time in Donegal, Dublin and Cork. She had three or four cases in progress in Dublin for people she was helping. She also had a Supreme Court appeal of her own in preparation and in October was doing a law course in UCC. In addition, her son was in hospital in March 1999 in Cork and required daily visits from her.
She accepted, however, that she would call on average about twice a week while passing the shop at Gneegevuilla and in this way became very friendly with Mrs. O’Mahony. She confirmed that the O’Mahonys had come with them to Donegal in October 1998 for several days when they looked at a range of properties. At a later point they also looked at a property in Banna, Co. Kerry.
She developed a friendship with Geraldine O’Mahony and noticed on one occasion that she was very upset while Mrs. Herron was present in the house. Mrs. Herron followed Geraldine into her kitchen where Geraldine confided certain matters in her. After that she would also confide in Geraldine and they became friends and remained so until March, 2001. Mrs. Herron told the Court that when the plaintiffs first met the O’Mahonys, it was her impression that they were an entirely dysfunctional family. She did not accept that pressure had been put on the O’Mahonys to sign the first document. The only pressure lay in the fact that the plaintiffs had to quickly find somewhere else to live as their stay in Scartaglen was ending. Mrs. Herron felt they had been strung along for weeks by the O’Mahonys. The purpose of the letter dated 10lh April 1999 was to deal with a situation where the O’Mahonys parents would not move out of Ballybeg. The O’Mahonys had failed to spell out clearly to Sean O’Mahony’s parents that they had to go.
Mrs. Herron insisted that the parties worked from a longhand draft on the 23rd of April during the all night discussion. Thereafter she prepared the typed document from the longhand draft on the 26th and gave it to the O’Mahonys that evening. Everyone signed the document on the 28lh. She had no recollection that Sean O’Mahony changed the figure for renovations from £75,000 to £95,000 on the typed document
On the night of the long discussion, Geraldine and herself had sat away from the two men who were by the fireside. Mr. O’Mahony nit picked through every single item in the agreement. In the end, Mrs. O’Mahony told her husband to give it a rest or conclude it.
She accepted that she put in the preamble by way of addition to the text contained in the draft when preparing the first contract. At that time she knew nothing about land law or property law. It was only when pursuing her LLB course that she learned anything about leases or the Statute of Frauds or such matters.
Mr. Cross pressed Mrs. Herron as to whether or not the question of legal advice had arisen prior to the execution of the first document. Mrs. Herron stated that they had recommended to the O’Mahonys that they get legal advice, but the O’Mahonys did not want to go to Mr. Casey because he was acting for the O’Mahony parents as well. The plaintiffs had suggested that the O’Mahonys go to someone else. However, when the document was signed up on the 28th, Mrs. Herron accepted she did not ask if the O’Mahonys had sought or received any independent legal advice in the meantime.
In relation to the second contract, Mrs. Herron was adamant that the deposit was paid out of her own moneys and produced a draft for the deposit drawn on her own bank, TSB in Killarney. She denied that the money in question had been given to her by Geraldine O’Mahony. She did become aware, when Mr. Casey would not allow the plaintiffs sign the second contract, that Mr. Casey wanted to see the title deeds to her Cork property. She contacted Cork Corporation who had a mortgage over the property, but it took her some considerable time to get the title documents and as she never got a formal request for same from Mr. Casey she decided not to hand them over. When the O’Mahonys pulled out of the Cork transaction in November in 1999, the plaintiffs then offered to pay for the use and occupation of Ballybeg from the time they had moved in up to the probable closing date for the transaction. A sum of £6,000 was suggested by Mr. O Siodhachain and accepted by the O’Mahonys. Other all aspects of the arrangements concluded in April 1999 were confirmed.
When the second contract failed, Mrs. Herron stated that the plaintiffs continued trying to raise funds to complete the purchase of Ballybeg. She confirmed the difficulties as outlined by Mr. O Siodhachain.
In relation to the third contract, Mrs. Herron stated that Geraldine came to her in September 2000 saying she needed a letter of intent to purchase Ballybeg, which the plaintiffs gave her. She later stated that the lending institution was not satisfied with the letter of intent, that she needed a signed contract. Mrs. Herron explained that the plaintiffs did not at that time have the necessary 10% deposit, whereupon Geraldine O’Mahony stated that £100 would suffice and that she would make her solicitor take it. At no stage were the plaintiffs ever told that the O’Mahonys had not signed this third contract.
From 2000 onwards, Sean O’Mahony’s attitude towards the plaintiffs changed, although she remained friendly with Geraldine, often helping her in the supermarket following the O’Mahonys move to Rathmore in November 2000. In the new year of 2001, Sean O’Mahony became markedly hostile. He would make snide and nasty remarks and kept asking if the plaintiffs had the money to close the purchase, stating that the closing date was approaching. Geraldine had told Mrs. Herron that she was under terrible financial pressure.
The plaintiffs called to Mr. Casey’s office in March 2001 in circumstances already outlined by Mr. O Siodhachain. They told Mr. Casey they wanted to help the O’Mahonys. Mrs. Herron said they offered to give up the 40 acres of land and buy only the farmhouse. Mr. Casey said no one would now buy the farm during the foot and mouth crisis. They also offered to give up the house and move out altogether if given reasonable time. Mrs. Herron said that the plaintiffs told Mr. Casey they were awaiting funds, whereupon Mr. Casey suggested extending the closing date. Mr. Casey suggested a longer period than that mentioned by the plaintiffs and suggested that the plaintiffs have their solicitor write to him officially, seeking an appropriate extension. Such a letter was sent by their solicitor to Mr. Casey on the 7th of March 2001.
The 15lh of March came and went Mrs Herron stated the plaintiffs assumed the extension was operating. Mr. O’Mahony continued to be nasty and unpleasant and when he put the FOR SALE sign, which had been in a shed, in a position where it could be seen outside the farmhouse in Ballybeg by passing traffic, they caused a letter to be sent in early April threatening proceedings against him. Notice to Quit was then served on them.
At a late stage in her evidence, Mr. Cross asked Mrs. Herron to put some sort of figure on the moneys which Geraldine O’Mahony had advanced to her during the term of their acquaintance. Mrs. Herron initially stated that she had received loans from Geraldine O’Mahony amounting to somewhere between £15,000 – £30,000 in total. Mr. Cross then put to Mrs. Herron a letter which she had written in May, 2000 acknowledging that as of that date a sum of £35,000 was due in respect of loans advanced by Geraldine O’Mahony to her. Mrs. Herron accepted that this was so and acknowledged her obligation to pay the sum back to Mrs. O’Mahony, whom she described as a very generous person.
Submissions of the Parties
On behalf of the defendants, Mr. Cross contended that the document dated 28th April 1999 was not effective to create a valid lease. Section 4 of Deasy’s Act required that any contract to create the relation of landlord and tenant for any definite period of time, not being from year to year or any lesser period, must be evidenced by note in writing. While the document was executed by all parties, clauses 11 and 12 were those provisions relied upon by the plaintiffs to suggest that a lease had been created. No other documents of any kind whatsoever had been produced to amplify or vary those terms which conspicuously failed to make provision for rent of any kind. Section 3 of Deasy’s Act specifically provided that the relationship of landlord and tenant is founded on contract made between the parties in all cases where there is an agreement by one party to hold land from another in consideration of rent.
While the plaintiffs had argued that upon their release from the Sundays Well agreement, the original agreement of April 1999 had been varied so as to provide for a rent of £6,000, there was no note or memorandum of this amended agreement, if any.
The document in any event was clear that its effect would come to an end on the 8th of December 1999. It was at all times obvious that the “leases ” would remain in force only until superseded by the contracts as set out in the preamble which had to be signed before a specified date, failing which the whole arrangement came to an end. Alternatively, he submitted, the document was self contradictory, and as it was prepared by the plaintiffs, it should be construed against them under the contra preferentem rule. Alternatively, there had been a total failure of consideration in respect of the April 1999 document. The plaintiffs had paid no money of any kind to the defendants. The document relied upon failed to specify any rent for any purported lease.
Secondly, it was submitted that if the document of April 1999 was effective to create some sort of valid lease, it was procured by undue influence or other circumstances of oppression and unfairness which demanded that the Court should set it aside.
Both parties in their submissions were in agreement as to the legal requirements necessary for the court to intervene on this basis. Firstly, it could be established by the claimant that the alleged wrongdoer exerted actual undue influence on the complainant to enter into the particular transaction being impugned. Alternatively, undue influence could be presumed where there was a relationship of trust and confidence between the complainant and wrongdoer of such a nature that it was fair to presume that the wrongdoer abused the relationship in procuring the complainant to enter into the impugned transaction. Once a confidential relationship had been established by evidence, the burden shifted to an alleged wrongdoer to prove that the complainant entered into the impugned transaction freely, for example by showing that the complainant had independent legal advice.
Certain relationships, such as solicitor inclined, raised the presumption as a matter of law. Even where the relationship did not fall into that category, the complainant could still establish the de facto existence of a relationship under which the complainant generally reposed trust and confidence in the wrongdoer, whereupon the existence of the relationship raised the presumption of undue influence. This formulation of the test had been approved by the Supreme Court in Bank of Nova Scotia-v-Hoean [1996] 3 IR 239, 246.
Mr. Cross submitted that the plaintiffs did in fact use actual undue influence on the defendants and on that ground alone the agreement could be set aside. Alternatively, the evidence clearly showed a relationship of trust and confidence reposed by the defendants in the plaintiffs prior to the signing of the document in April 1999 and thereafter, sufficient to shift the burden to the plaintiffs to establish that the defendants entered into the agreement freely and with independent legal advice. The evidence clearly showed that the defendants did not have the benefit of independent legal advice. Further, he submitted, the plaintiffs, and in particular the second named plaintiff, demonstrated in their evidence an understanding of the law far beyond that of a lay person, and certainly beyond that of the defendants. He submitted therefore on this limb of the test, that the plaintiffs had failed to discharge the onus of proof that the agreement had been entered voluntarily.
Mr. Cross further submitted that the agreement was manifestly improvident. The plaintiffs are currently living rent free in the defendants property. They have not sought to enforce any contract for sale, but rather their case is based on a contention that they enjoy a lease under which they are permitted to live at no cost in the plaintiffs property for 15 years.
Finally, in relation to the third contract, Mr. Cross submitted that there was no evidence that this document was ever executed by the defendants. Both defendants denied having executed the document, and this evidence was confirmed by the evidence of Mr. Terence Casey, the defendants solicitor. Furthermore, it was clear from the evidence that contrary to the suspicions held by the plaintiffs, the defendants did not rely upon any third contract, executed or otherwise, to raise finance from Anglo Irish Bank for the Rathmore supermarket.
If the various submissions of the defendants were accepted, Mr. Cross submitted that the court was clearly entitled to make an order for possession in the defendants favour.
Mrs. Herron submitted that there was the necessary note in writing sufficient to satisfy the requirement of Section 4 of Deasy’s Act. The original agreement made in April 1999, was varied orally in November 1999 when the defendants withdrew from the purchase of the plaintiffs property in Sunday’s Well. The variations were to the effect that the plaintiffs would remain in occupation of the defendants property under the 15 year lease, pending their purchase of the property to which the plaintiffs remained committed. The plaintiffs would pay to the defendants the sum of £6,000 for their occupation of the premises, such sum to be paid when the plaintiffs succeeded in selling their own property and closed the purchase of the defendants property.
Alternatively, if the formalities of Deasy’s Act or other legal requirements had not been complied with, the plaintiffs were entitled to an equitable lease under the rule in Walsh -v- Lonsdale [1882] 21 Ch D9. Alternatively, the plaintiffs were entitled to an equitable lease under and by virtue of the doctrine of part performance.
It was submitted that the alteration in the third contract of the purchase price from £214,000 to £220,000 was sufficient to satisfy the statutory requirements as to written form. Par 21 of Mrs. Herron’s written submissions sets out the various grounds relied upon in support of the contention that the amended leasing agreement was fully and adequately supported by part performance.
Mrs. Herron further invited the court not to hold that the April 1999 document created a licence. At par 28 of her submissions she refers to different types of licence, suggesting that the instant arrangements fall into none of the recognised categories. Further, by issuing a notice to quit and ejectment proceedings, the defendants implicitly conceded that a tenancy had been created.
Mrs. Herron’s submission on undue influence, though considerably more detailed than that submitted by Mr. Cross, did not differ as to the essential legal requirements. She submitted that there was no evidence of actual undue influence. She further submitted that there was no exclusive relationship between the parties resulting in the defendants placing trust in the plaintiffs so as to give rise to a presumption of undue influence. Alternatively, Mrs. Herron submitted, the evidence showed that the transaction was a free exercise of the defendants will and, in any event, no substantial benefit was obtained by the plaintiffs under the transaction. (Carroll -y- Carroll [1998] 2ILRM 218). Alternatively, the defendants had forfeited any right to relief by delay and approbation.
In relation to the third contract, Mrs. Herron submitted that there was a concluded oral contract between the parties to sell the property to the plaintiffs in October 2000. It was accepted that the contract to purchase sent to the plaintiffs solicitor contained a clause that no contract would come into existence unless and until the contract to purchase was signed by the defendants. However, the defendants intention to sell their property to the plaintiffs had been their intention since April 1999 and the decision to engage professionals to draw up the contract to purchase was a legal requirement and formality which was not made with the intention of changing the terms of the contract in any way. It had been the plaintiffs belief that the defendants had executed this third contract, but even if they hadn’t, there were sufficient acts of part performance apparent from the evidence to enable the court to hold that it was effective and binding.
Conclusions
The Court has formed the most definite view in this case that the relationship between the plaintiffs and the defendants was at no stage a relationship between equals. On the contrary, the evidence clearly establishes that when the plaintiffs first met the defendants in August 1998, the plaintiffs were an experienced duo specialising in paralegal and litigation work, both on behalf of others and on their own account Mr. O Siodhachain was a well known figure in the locality, both through his political, paralegal work and writings. Mrs. Herron, as both her personal and academic history and indeed her conduct of this case shows, is a woman with not only considerable experience of the law, but also is possessed of sharp mental skills and significant experience in contesting problems over a wide spectrum of issues.
By contrast, Sean O’Mahony left school at 16 years of age and has limited educational achievements. He is also to some degree handicapped as a result of injuries sustained in 1983 and visual difficulties which have left him with impaired eyesight The evidence in the case also satisfied me that Sean O’Mahony is a person of considerable immaturity who, in 1998, had no clear or well thought out concept for his future life and that of his family. He was also clearly very much under the influence of his parents and acted, in the words of the plaintiffs, like a 15 year old. Throughout the hearing, the court had the opportunity of observing the demeanour of all the witnesses both in direct and cross examination. The Court witnessed the emotional collapse of Mr. O’Mahony at one point during the giving of his evidence, an event which required a short adjournment, and was ultimately left in no doubt and I do hereby find that Sean O’Mahony was at all relevant times an immature, emotionally underdeveloped and easily manipulated individual of limited intelligence. Insofar as his wife Geraldine is concerned, the evidence establishes to my satisfaction that she found the interference of her husband’s parents difficult to put up with, that it caused difficulties between herself and her husband at times, that she felt isolated and vulnerable and that these difficulties were all exacerbated following the introduction of the plaintiffs into their lives.
It is not necessary for me to find a particular number of days or dates upon which the plaintiffs visited the defendants during the period August 1998 – April 1999. I am more than satisfied on the evidence and hold that over that period the plaintiffs intervened in the lives of this young couple in a manner which was totally inappropriate for persons who had in mind purchasing the defendants property. I do not accept that these interventions were, as suggested by the plaintiffs, altruistic. They were, in my view, entirely designed to mould the defendants to the plaintiffs intention which was to secure the defendants property at Ballybeg on the best possible terms. In reaching this view, I am paying particular regard to the actions of the first named defendant in advising and recommending that Sean O’Mahony consult a psychiatrist, in arranging a particular psychiatrist whom he should consult with, and in suggesting questions for Mrs. O’Mahony to discuss with Dr. Kinsch. I accept in full Mrs. O’Mahony’s account of Mr. O Siodhachain behaviour during the period August 1998 – April, 1999. I further hold that Mr. O Siodhachain encouraged Mrs. O’Mahony to take steps and adopt life style behaviour with the object and intent of driving a wedge between herself and her husband. I do not say that the involvement of the plaintiffs was such as to amount to “brain washing” of the defendants or either of them, but, during the period August 1998 – April 1999, the plaintiffs infiltrated the lives of the defendants to such a degree, and from such a position of comparative strength, as to further imbalance an inequality of negotiating position between the parties which was present from the outset. In particular, I accept the defendants evidence that when they sought to have professional guidance in relation to the purchase of the Sundays Well property, that they were put off this idea by the plaintiffs. I further find and hold that at no stage up to and including the date of execution of the first document did the defendants have the benefit of independent legal advice. I further hold that on the evidence they were encouraged not to seek such advice and that the first named defendant made the representations described by the defendants as to the “facilitatory ” nature of the first document and that he told them it was not worth the paper it was written on. At the time therefore of the execution of the document in April 1999,1 hold and find that there was a relationship of confidence and trust reposed by the defendants in the plaintiffs, although I will also deal with the issue of actual undue influence in this case in due course.
I will now turn to the issues.
I accept Mr. Cross’ submissions in relation to the document executed in April 1999. It is quite clear that what this document envisaged was an exchange of properties by means of sale within a specified period. I am satisfied the reference to a “lease ” in the document was not designed to create a lease as such but was intended rather to provide some sort of legal basis for occupation of the respective properties between the date of the document and the closing date on the 8th December 1999. It cannot in my view be regarded as a lease, because it fails to specify any rent. Further, I do not accept that this document was varied in any specific way by any agreement in November 1999 when the defendants withdrew from the Sunday’s Well purchase. I find it inconceivable, having regard to the meticulous way in which Mrs. Herron fastens upon and records such matters, that such an agreement, if made, would not be reflected in the second or third contracts, or in some other documentation or correspondence between solicitors. While Mrs. O’Mahony in cross examination may have said that she believed an offer of £6,000 was at some point made in respect of rent, Sean O’Mahony stated that the £6,000 in question was an adjustment to the purchase price to reflect the increase in value of Ballybeg between the date of the original document in April 1999 and October 2000. I prefer Sean O’Mahony’s evidence on this point, supported as it is by the singular absence of any other written record of some such supposed variation of the April 1999 document.
In my view the arrangements between the parties fell through completely as of December 1999, following which the plaintiffs were allowed to remain on as permissive occupants of the property against a background where both sides hoped the plaintiffs would produce the purchase moneys to complete the acquisition of the farm at Ballybeg.
I also accept that where contradictions appear in the document of April 1999, they must be construed against the plaintiffs who prepared them. The plaintiffs in evidence themselves accepted that the document should not be construed as conferring a rent free facility to the plaintiffs to live on the defendants farm for 15 years. In just the same way as the description of a tenancy arrangement as a licence cannot convert a lease into a licence, the converse seems to me to be equally true, namely, that the description under the name of a ‘lease’ of a licence or caretakers agreement cannot operate to convert a permissive occupant into a tenant where all the usual characteristics of a leasing agreement are absent In the instant case, there is no mention in the April 1999 document of even a single covenant, such as would characterise a lease. {Gatien Motor Co -v- Continental Oil Co. [1979] IR 406).
Nor do I accept Mrs. Herron’s submissions that any deficiencies in legal form can be compensated under the equitable doctrine of part performance. The evidence overwhelmingly establishes that at no time were the plaintiffs ever in a position to complete the purchase of the Ballybeg property, nor did they either pay rent or any portion of the purchase moneys. As the evidence shows, a number of judgments have been obtained against Mrs. Herron during the period up to November 1999 which, because they were unsatisfied, led to judgments being registered against her property in Sunday’s Well. She had in addition by mid 2000, borrowed £35,000 from Geraldine O’Mahony, a liability she acknowledged herself in evidence. This inability to at any stage complete the transaction does, in my view, effectively put paid to any suggestion that the doctrine of part performance can be relied upon in any way in this case. Nor in my view do the plaintiffs come to court with clean hands as my findings make clear.
The rule in Walsh -v- Lonsdale seems to me to have no application on the facts as found by me in the instant case. This doctrine was developed to provide for the enforcement of an informal lease for valuable consideration by applying the maxim “equity regards as done what ought to be done “, whereby the parties would be treated in equity as being in the same position from the beginning as if a proper formal lease had been executed. This situation usually arose where there was no adequate note or memorandum in writing of an agreement, but where there were sufficient acts of part performance to take the case out of the Statute of Frauds. However, it almost goes without saying, that the parties must have intended to create a lease, which I have found was not the fact or intention. Even if I am mistaken in this respect, the doctrine is in any event dependent upon the availability of the remedy of specific performance in the particular case, which is a matter within the discretion of the court. If the remedy is not available on the facts of the particular case, the doctrine cannot apply. I have already set out the reasons which coercively persuade the court that it should not exercise its equitable jurisdiction in favour of the plaintiffs in this particular case.
I propose to deal with the issue of undue influence, lest it be held elsewhere that the document executed in April 1999 has the effect contended for by the plaintiffs.
In my view there was actual undue influence in this case. As already mentioned, the court regards it as totally inappropriate for an intending purchaser to have interfered and intervened to such a degree, as occurred in this case, in the lives of the parties from whom it was intended to purchase a farm and property. I am satisfied from the evidence that Mr. O Siodhachain did endeavour to drive a wedge between husband and wife, so as to make Mr. O’Mahony more malleable in the terms he would seek for the sale of the family farm. I am satisfied he completely won over Geraldine O’Mahony, who seems to have followed his every advice and suggestion, to the extent of following practical philosophy courses in Killarney and collaborating with Mr. O Siodhachain in formulating questions to put to Dr. Kinsch about her husband’s behaviour on the occasion when Dr. Kinsch was due to visit the family farm. It is important to note that the making of the agreement in April 1999 was preceded by a letter from Mr. O Siodhachain to the O’Mahonys threatening to make them responsible, not only for rents incurred by the plaintiffs if they could not immediately move into Ballybeg, but holding them responsible also for any other loss of income which Mr. O Siodhachain might suffer as a result. These threats must be seen in context. By this time, the plaintiffs had insinuated themselves into the lives of the defendants over a period of months and I am satisfied were regular visitors to the defendants home at Gneegevuilla. I also accept the description in evidence given by both O’Mahonys as to how the plaintiffs won them over and, in certain respects, instilled a fear into them as regards the possible consequences of non co-operation with the plaintiffs. The letter written on the 10th of April can only, in my view, be seen as the severest form of pressure on the defendants to co-operate with the wishes of the plaintiffs or face those consequences.
I am also satisfied from the evidence that on the night of the all night discussion, the plaintiffs arrived in a brisk and business-like manner, quite determined to conclude matters. There is no dispute or argument about the fact that the parties sat up all night until 6 am before agreement was reached. It is hard to imagine a less satisfactory manner of negotiating to conclusion an important event in the lives of the O’Mahonys than this. The plaintiffs were obviously aware that the defendants did not have the benefit of legal advice in relation to the matters under discussion on the night in question. I do not accept the evidence of the plaintiffs that they recommended to the defendants that they seek and obtain such advice. Instead I prefer the evidence of the defendants that they were advised not to seek legal advice, and that they were content to go along with this based on representations made by Mr. O Siodhachain that the document “was not worth the paper it was written on “.
I think it more probable that in relation to the date of signing by the parties, that the evidence given by the plaintiffs may be more accurate. In other words, I accept that the document had to have been typed up following the all night meeting, that it had to be re-presented to the defendants when that had occurred. However, it seems to me to make absolutely no difference to the issue I have to determine, given the absence of independent legal advice prior to the execution of the agreement.
I am also satisfied that this agreement was an extremely improvident one from the point of view of the defendants, as subsequent events have all too clearly demonstrated. To the extent that the lease may be considered valid, thereby creating a rent free 15 year occupation of the defendants farm by the plaintiffs, it is difficult to imagine more a catastrophic outcome from the defendants point of view. The distress of the defendants, which was all too apparent during the hearing before me, can only have been compounded as increasing financial pressures came on them from banks and other lending institutions while the plaintiffs continued to fob them off with promises of completing the purchase which never materialised. It follows from the findings I have made, that I do not need to consider the alternative basis upon which the court may intervene, namely, that of presumed undue influence. It equally follows that if I am mistaken in my assessment of the witnesses and their evidence on the issue of actual undue influence, it is still open to me to hold, and I do so hold, that the onus of disproving presumed undue influence in the context of a relationship of trust, which I find to have existed, has not been discharged in this case by the plaintiffs.
It was urged upon the court to treat the delay in moving to set aside the April 1999 document as an approbation of the arrangements put in place in consequence. However, I am quite satisfied that the defendants continued under the influence of the plaintiffs throughout 1999/2000, a situation which was compounded by the severe financial pressure which came to bear on them from October 2000 onwards. Even on the plaintiffs own evidence, the defendants were at that stage desperate for money. Nonetheless, they did not, and I so find, disclose to their own solicitor the existence of the April 1999 document until all hope was gone following the passing of the final closing date in the third contract on the 15th day of March 2001. This non-disclosure in my view was a direct result of the influence exerted on the defendants by the plaintiffs.
I turn then to the issue in relation to the third contract, i.e. the contract prepared in October, 2000.
In this regard, I accept fully the evidence of Mr. Terence Casey to the effect that this document was never signed by either of the defendants, or by him on their behalf. I also accept his evidence that this document was never used by way of collateral or security for any lending institution, and in particular, was not used for the purpose of raising finance from Anglo Irish Bank. I accept his evidence that this document never left his office and I accept fully the reasons offered by him as to why that was so. I also accept fully his evidence that he first became aware of the April 1999 document some time in March, 2001, when he called his clients into the office to discuss the situation arising when the third contract was returned with a deposit of only £100. Again, on this point as to when Mr. Casey first learned of the existence of this document, the defendants themselves gave conflicting evidence, Mrs. O’Mahony agreeing with Mr. Casey, but Mr. O’Mahony stating, mistakenly in my view, that he believed this document had been mentioned to Mr. Casey some time in November/ December, 1999. I am satisfied that any error on this point by Mr. O’Mahony arose from the lengthy period which he spent in the witness box and the manifest distress under which he laboured while giving evidence.
Accordingly, I hold against the plaintiffs on this issue also.
This brings me finally to the defendants claim for possession.
When this matter was first aired before me in October 2001,1 acceded to Mrs. Herron’s request to injunct and halt the District Court ejectment proceedings on very specific conditions. Those conditions included requirements that pleadings be exchanged within specified time limits and that discovery equally take place between specified time limits, all with a view to having the case moved forward to a list to fix dates in early 2002. I expressly stated at the time that I was doing so as an exercise in case management and with a view to having all issues determined in a full plenary hearing. Such a hearing has now taken place before this court, extending over a period of 5 days, some 3 days longer than the parties indicated to the court at the outset of the hearing.
In view of my finding that the plaintiffs occupied the defendants farm at Ballybeg as permissive occupants only, that entitlement to remain in occupation terminated following the demand made for possession by the Notice to Quit. While Mrs. Herron makes the point that the Notice to Quit refers to a tenancy from week to week, Mr. Casey explained in evidence that this was inserted merely because he saw it as the most appropriate way to deal with a permissive occupancy. While a very short period only was provided to the plaintiffs to vacate the property, the fact remains that they have not done so and continue to occupy and reside in the property, paying no rent, from May 1999 up to and including the present.
In my view, the demand made was adequate to terminate the permissive occupancy and I accordingly declare that the defendants are entitled to an order for possession of their lands at Ballybeg.
While the court heard evidence that a sum of £35,000 remains due and owing by Mrs. Herron to Mrs. O’Mahony, it was accepted by Mr. Cross that this sum, although undoubtedly due, forms no part of the defendants claim in the present proceedings and I am accordingly making no order in relation to that liability.