In Hammond v Osborn ( [2002] EWCA Civ 885) O took care of P (an elderly neighbour) out of kindness and compassion. He gave her GBP300,000 (the value of his investments). Part of the money was used to buy a house. Title was in F’s name (O’s son) but he held it on trust for her. The result was that P lost over 90% of his assets and became prospectively liable for a large tax bill which he would not have been able to meet out of his remaining assets. O did not explain this to P, she merely asked him whether he was sure he wanted to make the gift. P later died intestate. The gift to O was challenged by H, the administratrix of P’s estate.
The relationship and the transaction were such as to give rise to the presumption of undue influence. The question was whether the presumption could be rebutted by showing that the transaction was the result of the exercise of independent exercise of P’s free will. Had the gift been made only after full, free and informed thought about it? ([25]).
P had not received advice as to the nature and effect of the transaction from an independent, qualified person. In fact, he had not received any advice at all, even from O.
‘Even if it is correct to say that Mrs Osborn’s conduct was unimpeachable and that there was nothing sinister in it, that would be no answer to an application of the presumption … the court does not interfere on the ground that any wrongful act has in fact been committed by the donee but on the ground of public policy, which requires it to be affirmatively established that the donor’s trust and confidence in the donee has not been betrayed or abused.’ (per Sir Martin Nourse at 32).
Ward LJ emphasised that in cases of presumed undue influence, the courts interefere on the grounds of public policy and not because there is any finding that there has been actual undue influence. The next stage of the inquiry, once the presumption has arisen, is to consider whether the party to whom the burden has shifted can show that the transaction was the result of full, free and informed thought. This will usually be done by showing that the necessary independent advice was given. Here there was a total absence of independent advice ([50]).
A survey of the circumstances in which the decison was made and of its consequences for P did nothing to rebut the presumption of undue influence. The presumption had not been rebutted and the gift was set aside.
Michael Lower
