Judge: Silber J.
Citation:  EWHC 1170 (Admin)
Summary: This case is included not because it is a decision of the Court of Protection, but rather because it represents a very useful summary of the law of undue influence in the context of the very vulnerable.
The facts are somewhat complex, but the issue for determination arose, ultimately, out of a confiscation order made in 2007 against the second defendant, who had been illegally importing goods without paying the prescribed duties. His mother, the claimant, had, in 2004, transferred to him for no consideration a house. In the application before Silber J, the claimant contended that the transfer to the second defendant should be set aside on the grounds of presumed undue influence of the second defendant and/or non est factum on the basis that when the claimant signed the transfer of the house, she did not know what the document was. The second defendant supported the application, but it was vigorously resisted by the CPS on the basis that (1) that the house was purchased with the proceeds of the second defendant’s criminal activities and second, that the claims of presumed undue influence and/or non est factum could not succeed.
The claimant (aged 83 at the date of judgment) was profoundly deaf from birth, did not learn to speak, and was unable to read or write, understanding only some basic signs of sign language, able to do some lip-reading, and able to communicate with her hands. In 2003, her husband having died some years previously, she appointed her son as her attorney with general authority to act on her behalf in respect of her property and affairs.
In 1998 she purchased a house, she contended with her late husband’s savings (the CPS contending that it was with the proceeds of her son’s crimes). She transferred the house to her son in 2004 by way of a transfer deed prepared by a solicitor (arranged by her son) and purportedly signed by her.
Silber J admitted the evidence of the claimant under the provisions of the Civil Evidence Act, but noted that she had not been subject to cross-examination and was clearly somebody of very limited memory, and therefore declined to attach any weight to it unless corroborated by other evidence. For reasons given in some detail in his judgment, he was prepared, however, to accept that (despite his conviction for dishonesty) the son’s evidence was reliable. He was also prepared to accept a somewhat Dickensian story as to how it was that the claimant’s late husband had come to accumulate sufficient sums to allow her to purchase the house.
He therefore proceeded to consider whether the transaction by which it was transferred to her son should nonetheless be set aside upon the basis of presumed undue influence. Summarising the case-law (Royal Bank of Scotland v Etridge (No 2)  2 AC 773; Smith v Cooper  EWCA Civ 722.), Silber J held (at paragraph 53) that three questions had to be asked:
(i) Was there a relationship between the claimant and the second defendant such that a potential claim of presumed undue influence arises? The burden is on the claimant to establish this relationship;
(ii) If there is such a relationship, is there a transaction arising out of the relationship that calls for evidence of the free exercise of the will of the claimant as a result of full, free and informed thought? The burden is on the claimant to prove the existence of such a transaction; and
(iii) If there is such a transaction that requires evidence of the full exercise of the will of the claimant as a result of full, free and informed thought, then can the CPS (as the party seeking to counter the inference of undue influence) discharge the evidential burden and provide a satisfactory explanation?
In relation to the first question, the CPS accepted (and Silber J indicated he would have found) that the fact of the signing of the Power of Attorney gave rise to a relationship of presumed influence. He also noted (at paragraph 54) that “the claimant was deaf, dumb, barely educated and illiterate and …, since the death of her husband, she had become reliant on the second defendant to manage her affairs and to physically care for her. There was clear evidence from, for example, the claimant’s sister Mrs Savage that the claimant went “downhill” after her husband’s death in 1997 so that in consequence she was reliant on the second defendant to deal with these matters on her behalf.”
In relation to the second question, Silber J declined to accept the contention of the CPS that the transfer of the house could be reasonably accounted for (essentially because it alleviated the risk that inheritance tax would fall to be paid upon it upon her death). Amongst the reasons he gave for concluding that it was a transaction requiring explanation was (perhaps unsurprisingly) that “any transaction by which the donee of a Power of Attorney obtains a gift of a substantial asset from the donor of the Power of Attorney calls for some form of justification, especially if, as in this case, the donor is old, infirm, deaf and dumb and the donee himself organises the transaction.”
In relation to the third question and, unusually, the CPS found itself in the position of seeking to establish (as against the contentions of the claimant and her son) that, nonetheless, the transaction had been entered into as a result of full, free and informed thought on the part of the claimant. The CPS sought to draw assistance from the fact that the claimant’s own evidence was to the effect that her son would not cheat her and was a good man, but Silber J noted that “it is not determinative of the issue that the person presumed to exert undue influence did not act wrongfully as it is not an ingredient of undue influence that the wrongdoer cheated the victim” (citing Mummery LJ in Niersmans v Pesticcio  EWCA Civ 37). Silber J was also unimpressed by the submission that, notwithstanding the claimant’s severe communication problems, it did not follow she was unable to make up her own mind as to matters. None of points advanced by the CPS, in his view, assisted with establishing that the claimant had entered into the transaction as a result of ‘full, free and informed thought.’ Having reviewed the case-law, and in particular those cases involving consideration of whether it could properly be said that the individual had received independent advice, he concluded (at paragraph 74) that
“In my view, in cases where a donor is suffering from a mental impairment or a learning difficulty, the court is obliged to look with special care to see if the decision taken by a donor is really based on full, free and informed thought. Snell on Equity (32nd Edition page 272) quotes the case of Williams v Williams  WTLR 1371, where the presumption was not rebutted in the case of a claimant suffering from severe mental impairment and who was dependent on the defendant even though it was accepted that the claimant had been “independently advised and that advice would have brought to an ordinary person the implications of what he was doing”. The claimant in the present case was not suffering from a medical impairment but she was deaf, dumb and barely educated and this required especially careful advice before the CPS would have discharged the burden of showing that the claimant disposed of the house as a result of full, free and informed thought.”
Although the solicitor in question who was said to have given the claimant the necessary independent advice did not give evidence, an attendance note recording a conference and a letter from the solicitor were both before the Court, and Silber J had no hesitation (at paragraph 80) of making a number of relatively severe criticisms of the steps taken by the solicitor, and hence of the independence of the advice he could give; not the least of these was that he did not see her in the absence of her son, and that the letter in which advice was given was sent to someone who could not read, and it appeared that the solicitor took no steps to ensure that she had the letter read to her in terms she could understand.
Silber J therefore declared himself satisfied that the transaction was to be set aside because the presumption of undue influence could not be disproved by the CPS. Although he did not then need to go on to consider the claim of non est factum, he noted that the plea enabled a party to avoid an agreement if that party was permanently or temporarily unable, through no fault of its own, to have any real understanding of the purport of the document, irrespective of whether this inability arises from defective education or any incapacity (Saunders v Anglia Building Society  AC 1004, 1015-1016). The judge noted the reluctance of the Courts to allow people to avoid transactions under this head, and, on the basis of the evidence before him concluded (at paragraph 90) that “In this case there is no evidence as to what the claimant thought she was signing. She might well have realised that she was transferring the house to the second defendant. In other words, she has failed to discharge the burden on her and for that reason, this claim must fail.”
Comment: As noted at the outset, this is not strictly a case involving lack of capacity (and, indeed, the judge was careful not to make a finding that the claimant, notwithstanding her evident disabilities, did not have capacity to take the relevant decision at the relevant time). However, it serves both as a useful summary (albeit on rather odd facts) of the case-law on presumed influence, and also an object lesson in the steps that are necessary for those advising the vulnerable to take when they are engaged in a transaction involving anyone potentially capable of overbearing their will.