17 November, 2020
In the case of Perwaz v Perwaz  UKUT 325 (TCC), the Upper Tribunal (Tax and Chancery Chamber) examined the issue of undue influence when a mother alleged her son had abused their relationship of trust and confidence and coerced her into transferring her property to him.
The case involved "N", an elderly widow whose husband died in 1997. Following the death of her husband, N gave her eldest son, "S", Power of Attorney. She also made a Will, appointing S and his brother as her personal representatives and trustees, leaving everything on discretionary trusts for her family. S also took over the management of the family business, but N remained a director and majority shareholder.
To assist his mother, S and his family moved into N's home which was worth around £800,000. In 2013, S proposed to purchase the property from N who could then realise the equity whilst remaining in occupation for her lifetime and being looked after by him.
N transferred the property to S and he immediately executed a declaration of trust to the effect that he held a 75% interest in the property and N held the remaining 25% interest.
N argued that S had a relationship of influence over her and the transfer of the property was made as a result of undue influence (presumed and actual). She also argued there had been mistake and misrepresentation in relation to the transfer she had signed.
The claim was initially heard in the Land Registration Division of the First Tier Tribunal ("FTT") and N was successful in arguing her case. The judge found that S was plainly in a relationship of influence over N in relation "at least to this property transaction." No decision was made as to mistake or misrepresentation in the transaction.
The FTT based its decision on a number of factors. The first was in relation to N herself. The judge described N as a "voluble" and "emphatic" person who did not easily understand technicalities, legal documents or business of any complexity but would, when she felt under pressure, dig her heels in until she was satisfied. She was also described in the case as the "family matriarch" and there was no suggestion that N left matters of business to S.
The FTT also pointed out that the property transaction had several "troubling factors" which required an "explanation" and S had not provided any. One of these factors included S relying on a lower valuation for the property in the transfer and not telling N about a higher one.
The FTT's order included a decision that the transfer from N to S should be set aside. S appealed against the FTT's decision to the Upper Tribunal (UT).
S was successful in his appeal. Interestingly, the UT held that the FTT had made an error of law in reaching its conclusion about undue influence and stated the decision was incorrect.
The UT considered that the FTT judge had incorrectly made a finding of a relationship of influence existing between N and S in relation to just the transaction itself. The UT clarified that a relationship of influence must exist between the parties beforehand and pre-date the transaction. This is because in order for a claim of undue influence to be successful, the claimant has to have been open to being influenced beforehand, so that all that is required then is a transaction that calls for explanation.
The UT concluded that the presumption of undue influence had not arisen in the case and substituted its own decision for that of the FTT. The case was remitted back to the FTT for re-hearing.
The case clearly shows that for a claim of presumed undue influence to be successful there must be two elements that follow on from each other:
Claims of undue influence are becoming increasingly common in respect of property transactions where one party feels they have been coerced into transferring property to another.
In addition, undue influence can occur when a person has been forced or coerced into making or changing a will so that it benefits another party. This is one of the grounds under which it might be possible to contest a will.
In any claim where undue influence is being alleged there will need to be strong evidence to support the claim.
If you consider you have been coerced into transferring property to another party, or if you consider someone has been coerced into making or changing their Will, we can assist by carrying out the necessary investigations, reviewing evidence and advising on a potential claim. Considering the legal position, we can then act on your behalf in pursuing a claim for undue Influence, offering a range of funding options depending on the facts of the case.
For more information contact Tom Howcroft in our Contesting a Will department via email or phone on 0333 207 1130. Alternatively send any question through to Forbes Solicitors via our online Contact Form.