Hart & anr v Burbidge & ors [2014] EWCA Civ 992 On appeal from: [2013] EWHC 1628 (Ch)

Analysis

and 

1. ARTHUR KENNETH GERALD SAMWAYS
2. GRAHAM DOUGLAS SAMWAYS
3. CHRISTINE MARGARET GARLINGE
4. PETER KENNETH HART
5. LEWIS ROGER HART
6. GEMMA LOUISE HART

v

1. SUSAN ANNE BURBIDGE
2. BRIAN JEFFERY BURBIDGE
3. KENNETH CHARLES HART
4. PAUL ROGER HART

The appellants appealed a decision in two actions that had been tried together whereby the judge held that the first appellant (A1) was guilty of presumed undue influence over her mother (M) in relation to three transactions which produced a total of £700,000 in the hands of A1 and her husband (A2), who was also held liable on the basis that he had been unjustly enriched by the undue influence. The judge ordered that the appellants put the parties back into the position they would have been in had the impugned transactions not occurred.

The claims were brought by various beneficiaries under M’s will. The first claim was brought by A1’s two elder brothers (K) and (P) (together, the brothers) and the second claim was brought by three of M’s siblings, K’s son and P’s two children (the Samways claimants).

M died on 7 November 2008 aged 86, predeceased by her husband. M’s last will dated 26 April 2007 (the will) made two specific legacies; the first (property 1) to the brothers, the second (property 2) to the Samways claimants (and M’s twin sister and any grandchildren living at her death), the residue to be divided equally between the brothers and A1.

Prior to her death, the judge found that M had expressed a wish to move in with A1 and A2. The parties identified a property (the new property). On 13 February 2008, M, A1 and A2 met with a solicitor (S), who took a note of the meeting. The judge held S’s note of this meeting (as with all of the other meetings) to be accurate. It recorded M’s dissatisfaction with the brothers and the fact that A1 and A2 did everything for her. It said that A1 and A2 wished to buy the new property, which would be financed by the sale of A1 and A2’s property (worth some £280,000), the sale of property 1 and property 2 and M’s cash of £290,000. The judge found that this last suggestion emanated from A1. The note also recorded that A1 would want to honour payments to the brothers and the brothers and sisters and grandchildren in the will for the amount received on the sale of property 1 and property 2. S’s firm dealt with A1 as the person looking after M’s affairs in relation to the sales.

On 21 February 2008, M transferred £290,000 to A1 and A2 as a gift (transaction 1).

In March 2008, P became aware of the proposed transactions and visited M, recording their conversations. The judge found that A1 had made out to P that the new property would be put partly in M’s name and that A1 and A2’s property would be sold. M repeatedly said that ‘they’re gonna have my name on the doings’ in relation to the new property.

On 8 May 2008, M and A1 met with S. It was said that M would have a 50% interest in the new property. On 12 May 2008, S met the brothers who asserted concern as to A1’s influence over M and that A1 was feathering her own nest. They stated that they had always been told that they would split property 1 and 2 in return for A1 previously having received a different property worth £275,000 by way of a deed of variation in relation their father’s will.

On 14 May 2008, S wrote to M expressing his unhappiness that M would be putting in all of the money towards the new property, advising that M should have a larger share. On 20 May 2008, S, M and A1 had a telephone conversation in which the judge found that A1 shouted and was aggressive. S requested that M’s solicitors write to him with proposals but they did not do so despite his chasing letter on 27 August 2008.

On 3 June 2008, A1 and A2 exchanged contracts for the purchase of the new property. On 6 June 2008, M sold property 1 for £249,500 and on 8 August 2008 she sold property 2 for £170,000 (transaction 2). M transferred the net proceeds of the sales to A1 and A2, totaling £410,000 (transaction 3), which A1 and A2 contended were loans from M to them. The loans were undocumented except for an unsigned memorandum produced after M’s death referring to a sum of £400,000 interest-free, repayable only within one year of M’s death.

On 7 September 2008, the judge found that A1 drafted a letter for M to sign and send to S stating that M was living with A1 and A2 and stated dishonestly said that their solicitors had confirmed that they would write to S, when they had not been asked to do so.

The judge found that A1’s motive could only have been to avoid involving S in the transactions for the only plausible reason to prevent him advising M to protect her own interests. The judge held it was not unreasonable to suppose that either M was actively mislead by A1 about the true position or she was accustomed to leaving her financial affairs to A1 and was happy to sign whatever A1 asked of her.

The purchase of the new property was completed on 6 October 2008 for £700,000, funded entirely by M’s money and the new property was put solely into A1 and A2’s names. On 7 October 2008, M and her twin sister moved into the new property but a few days later M fell ill and moved into hospital. M and her sister died within the following two months. After M’s death, A1 and A2 sold the new property for £595,000 and paid £410,000 to M’s executor as repayment of the loan. S obtained probate of M’s will.

The judge held that the three transactions were procured by undue influence by A1 over M. He held that the relationship between A1 and M was exactly described by ‘trust and confidence, reliance and dependence’; that the transactions clearly called for an explanation and A1 failed to rebut the presumption of undue influence. He held that A2 was unjustly enriched by the undue influence and that A1 and A2 were to compensate the claimants for the monetary value of what they would have received, free of IHT, if property 1 and 2 had formed part of M’s estate at the date of her death and had been sold and the proceeds of each gift had been distributed. The order also provided that A1 and A2 were jointly and severally liable to the brothers for that which they would have received as residue if M had still had the £290,000 which was gifted, setting out specific sums of money to be paid including to S as executor. A1 and A2 were ordered to pay 95% of the costs including S’s costs as executor provisionally assessed at £22,090.75. Permission to appeal was refused as it was out of time.

On 14 August 2013, A1 and A2 filed their appellants’ notices. On 30 December 2015, Lewison LJ granted A1 and A2 permission to appeal, but did not extend time for the filing of the appellants’ notices.

The grounds of appeal before the Court of Appeal were as follows:

1. (i) The judge was wrong to find that A2 was liable in unjust enrichment because it had only been pleaded that he was a constructive trustee;
2. (ii) The judge should not have made findings about quantum because the parties had agreed that further submissions on quantum would be made after judgment;
3. (iii) The judge was wrong to hold that the three transactions disadvantaged M because they were to her benefit. She wanted to live with A1 and A2 thus there was proper explanation for the transactions;
4. (iv) The judge was wrong to find that A1 had failed to rebut the presumption of undue influence in respect of transaction 1 because M was dissatisfied with the brothers and therefore there was a proper explanation that she wished to prevent them from obtaining her money;
5. (v) The judge was wrong to find that A1 had not rebutted the presumption in respect of transactions 2 and 3 because M wanted to live with them, which was proper explanation for the transactions;
6. (vi) The judge was wrong in his assessment of quantum because he ignored the fact that (a) M intended to change the will to exclude the brothers, (b) the brothers acted in a way in which equity would not assist them and (c) M was better protected by the loan than an interest in the new property. Moreover, the judge should not have used the sale proceeds of property 1 and property 2 to calculate compensation because had there been no undue influence the properties would have been sold later at less value;
7. (vii) The judge was wrong to order A1 and A2 to pay 95% of the costs and the executor’s costs because the claimants lost claims for actual undue influence, breach of fiduciary duty and breach of common law duties.

The respondents asked the court to set aside the grant of permission to appeal on the basis that the appellants’ notices were filed six weeks late (referring to Sayers v Clarke Walker [2002] 3 All ER 490 and CPR Part 3.9) and the skeleton argument was misleading. On 15 May 2013, Lewison LJ refused to set aside the permission, adjourning the question for the appeal court.

Held:

1. 1) Ground (i) was flawed. Pleadings should generally include facts, not law. The court is not always constrained by the legal issues that the parties agree for determination. As to whether lack of knowledge could be a defence to unjust enrichment in such a claim, such issue will have to be determined in a case in which is directly arises.
2. 2) Regarding (ii), no such agreement was accepted by all counsel at the trial thus the judge was not wrong to consider quantum alongside liability in the main judgment.
3. 3) Regarding (iii), transaction 1 was not to be considered in isolation. The transactions called for an explanation on any basis. Disposing of M’s cash by the gift seemed obviously to call for an explanation because it deprived her of security and income. As to the two other transactions, the terms of the loan were massively disadvantageous to M, being on an interest-free basis with no repayment until after her death. As to whether the judge should have considered whether there was a reasonable explanation before moving on to consider whether the presumption was rebutted, (Turkey v Awadh [2006] WTLR 553 considered), in the present case, no reasonable explanation was available.
4. 4) Regarding ground (iv) and (v), the judge was correct that A1 failed to rebut the presumption in relation to all three transactions. The transactions were not advantageous to M because the gift left M with no income or fall back, the loan was on disadvantageous terms and the new property was put into A1 and A2’s names.
5. 5) As to ground (vi), since the judge found that M had no desire to make a new will, there was no merit to the first point under this ground. The judge was required to provide relief for undue influence; the brothers’ conduct and M’s upset could not have affected that relief. The arguments that M was better protected by the loan and that the claimants were better off by property 1 and 2 being sold before the fall in the market were made only with the benefit of hindsight and with no available expert evidence respectively. Whilst there was an inconsistency between the judge finding that the properties would have been sold absent the undue influence in the executor’s year and then compensating the claimants on the basis of the values at which the properties were sold a year earlier, the expert evidence justified his conclusion.
6. 6) Regarding ground (vii), the judge was best placed to make the assessment on costs and he held that the costs had not been materially increased by those allegations. The executor’s costs were a direct result of the undue influence.
7. 7) It cannot any longer be right to say that the court should have regard to the lengthy list of factors in the old CPR 3.9(1) when considering whether to grant permission to extend time for filing an appellant’s notice. As to whether the approach set out in Denton v TH White Limited [2014] EWCA Civ 906 is relevant, that must be decided in another case. There were no grounds to set aside the extension of time in this case.

8) Application to set aside the permission to extend time for the appellants’ notice refused and appeal dismissed.

JUDGMENT LORD JUSTICE VOS: Introduction [1] These appeals are from the judgment of Sir William Blackburne, sitting as a deputy judge of the Chancery Division, delivered on 12 June 2013 in two actions that Master Moncaster ordered to be tried together on 24 August 2011. The judge held that Mrs Susan Anne Burbidge (Mrs Burbidge) …

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