Where a transaction appears to be very one-sided or manifestly more advantageous to one side or the other, judicial eyebrows are likely to be raised. However, as a High Court ruling showed, such an imbalance does not necessarily mean that a bargain should be set aside on grounds that it is unconscionable or the product of undue influence.
A householder was anxious to pay off a £41,000 debt to a local authority which was secured by way of a charge – effectively a mortgage – over his property. To that end, he transferred ownership of the property to a woman who discharged the debt. Free of the charge, the property was at the time worth at least £300,000.
After he launched proceedings, a judge noted that the one-sided transaction was very much to his disadvantage. There was, however, no allegation of misconduct on the woman's part and his initial claims that she had acted fraudulently or overtly pressured him into executing the transfer were not pursued.
In nevertheless setting aside the transaction, the judge found on the evidence that there was a presumption that undue influence had been brought to bear upon him. The transaction was clearly one that called for an explanation. Noting that he was in poor health and desperate for money at the time, the judge found that the woman had exploited or taken advantage of his vulnerability.
Upholding her appeal against that outcome, the Court well understood that a judge, when faced with a badly one-sided transaction, might be tempted to set it aside. The householder had, however, failed to establish on the evidence that she was aware that he had recently suffered a second heart attack or that she held a position of ascendency, dependency or influence over him.
In finding that a presumption of undue influence did not arise, the Court noted that it was he who had proposed the transaction. It was not alleged that she had manipulated him into doing so. The bargain, although imbalanced in terms of advantage, was not rendered unconscionable by any conduct on her part. It had not been shown that, in accepting his proposal, she had sought to influence his exercise of free will in any way, whether directly or indirectly.
It is vital to seek expert advice before transferring ownership of a property. Contact Ian Sheppard i.sheppard@sydneymitchell.co.uk on 08081668827 for guidance.
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