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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Smith v Cooper & Anor  EWCA Civ 722 (25 June 2010)
Cite as:  2 FLR 1521,  2 FCR 551,  EWCA Civ 722
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ON APPEAL FROM NORWICH COUNTY COURT
HIS HONOUR JUDGE DARROCH
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE LLOYD
LORD JUSTICE WILSON
| PETER JOHN SMITH
|- and -
(by her litigation friend the Official Solicitor)
Katharine Bundell (instructed by Roger Green & Co) for the Respondent
Hearing date: 20 May 2010
Crown Copyright ©
Lord Justice Lloyd:
The proceedings at first instance
The transfer of Fifty Farm into joint names and the purchase of the adjacent land
"IRG also explaining that gift means no money changing hands. Mr Smith explained he is financially supporting Ms Cooper."
Should (Peter Smith) phone we came in today to pay the money for the adjacent land however I must stress that if Mr Smith wishes to purchase he needs to do the two transactions together through you, this includes the £50,000 for Fifty Farm and the field totalling the actual amount overall £45,500 for S Cooper (4,500 for field) and then £9,000 field Peter's money to pay totals £54,500,
"Disregard the info she left at reception. She wants Fifty Farm transferred into the joint names of herself and Mr Smith."
"Dear Mr Smith and Miss Cooper,
Transfer of equity in Fifty Farm, Downham Road, Nordelph.
Thank you for your note and later telephone call stating that I was to ignore the contents of your note. I would appreciate you signing the copy letter enclosed to confirm that (1) you agree the transfer of Fifty Farm to your joint names and that no monies are to change hands (2) that the additional land you are purchasing adjacent to your property is to be in your joint names. I look forward to hearing from you on these points."
They duly signed that letter and returned it to him which he received on 14 June.
"Clients are concerned about transfer of equity. Seems as though Mr S has worries that his hard work and purchases (camper van, car etc) have not been acknowledged as being contributions to half value of house even though amount comes to £40,000 to £50,000 plus £10,000 he paid for land adjacent. Ms Cooper acknowledges his concerns and says that there is no need to transfer house back to her sole name and that they trust each other to make provision for each others' children in the event of one of them dying. (No wills at present and don't want to make wills.) Explained again TinC and JT provisions and that they could have a declaration of trust to reflect shares in property. No they don't want this."
"I understand from you that contributions and vehicles and other items have been purchased by you Pete to represent a contribution towards the share in Fifty Farm that you Susan have given to Pete. You both accept that these purchases are for your joint use and enjoyment as is the case with the property."
The purchase of Rose Cottage
"IRG explaining the JT and TinC position. IRG concerned that same toing and froing will happen on this property as Fifty Farm. Clients explained monies which are with WG are from a mortgage of Fifty Farm. Monies joint and their "Rose" must go into joint names. Clients selected joint tenancy. No need for declaration of trust."
"She's called again. She's concerned because Mr Smith said to her that you are her Solicitor and not his and he is having cold feet about buying Rose Cottage. She said her father has told her off for transferring her property into their joint names as she is mentally not well and she is concerned that as the mortgage is in their joint names and she would be unable to pay it herself - however she said that she did this because you advised her that it would be in her best interest. She said she put her trust in you and Mr Smith to sort it out on her behalf. She also said that when you transferred the property into their joint names you asked her what it was worth - she said she doesn't know why you asked her this and it is concerning her. She said she is really keen to go ahead with the purchase of Rose Cottage, and would have continued even if the problem with the boundary didn't get sorted out. She said she paid for her house cash and would have sold it but cannot do so now Mr Smith has the mortgage."
"House to be in joint names and she is aware of why and what this means for her and Peter. No problem."
"Explained to him that I cannot speak to Susan's father as he is not my client and can he speak to Mr Cooper and explain this. He informed me that Susan Cooper his partner is going through another bout of depression which she occasionally has. He says they do want to proceed and it is because Susan is under pressure that she is having the panic attack and saying what she is saying."
"Client wants Rose Cottage in her sole name. Peter Smith agreeable to this. I will require confirmation from them both on this point before able to do so. Client does not want Peter S to have any interest in this property at all and will transfer her interest in Fifty Farm into Peter S sole name subject to Abbey mortgage. They will need Abbey's consent to this. Client thinks Peter will look after her but not trust him entirely. Explained I must have the same instructions from them both otherwise unable to act for them both."
"JT and TinC explained. Clients not want TinC with declaration of trust. Explained JT to them and that given it is second relationship and children from previous relationship JT with wills is the minimum I would expect. Clients to think about wills. Double checked with Mrs C as to D of T given message left with NCC yesterday. No not required. Mr S and Ms C have spoken and they wish to own as JT."
Work done to Rose Cottage
"I believe that she was expecting something in return and indeed that is what she has received. I have been through figures and pointed out that there was undoubtedly a substantial contribution to the household and also a contribution to the purchase of the adjoining land and Rose Cottage. I have no doubt that the Claimant has invested well over £60,000 in actual money and, of course, he has provided physical services as well."
I will return later to the upshot of all that but the judge relied on it in part in the context of addressing the question of what should be regarded as the intention of the parties in respect of their respective beneficial shares and concluding that they did indeed intend to share equally.
Undue influence: the judge's decision
"An important feature of a case such as this can be whether the other party received independent advice. Mr Grimes always saw the two parties together. He acted for them both. He did not know one better than the other and to that extent was independent. If he had insisted upon Miss Cooper going to see another solicitor that would have strengthened Mr Smith's case. The fact that he did not do so does not in my view weaken it."
Thus he did not base his decision in favour of Mr Smith as regards undue influence on this factor.
Rebutting the presumption: Mr Grimes' role
"Q. So between 6 May and 11 June you have had a number of instructions from Susan Cooper and the only instruction for a joint tenancy, apart from this one when she countermands her note, is where she is seen with you in the presence of Peter Smith. Did it not occur to you that she needed to be seen alone and that you needed instructions from her and to give her advice?
A. They were both my clients. Unless I believed that there was undue influence or anything of that nature, and I did not believe that there was."
The point returned later in his cross-examination (transcript page 16):
"Q. So this is a history of people changing their minds, in particular Miss Cooper being concerned about what she was doing. But you did not see fit to think that she might want independent advice from her own solicitor?
A. No. The circumstances as they happened could not have given me concern in that way."
"Q. You mentioned in your own evidence that you had no sense of undue influence. What do you mean by that? What would have put you on notice that you needed to do something else?
A. I think there was one note. I cannot remember which one it was now. There was one note where - oh here it is at 1016. I put a note here that Mr Smith is not bothered whichever is selected. I think that sums it up really for me."
Undue influence: did the presumption arise, and was it rebutted?
"Proof that the complainant placed trust and confidence in the other party in relation to the management of the complainant's financial affairs, coupled with a transaction which calls for explanation, will normally be sufficient, failing satisfactory evidence to the contrary, to discharge the burden of proof. On proof of these two matters the stage is set for the court to infer that, in the absence of a satisfactory explanation, the transaction can only have been procured by undue influence. In other words, proof of these two facts is prima facie evidence that the defendant abused the influence he acquired in the parties' relationship. He preferred his own interests. He did not behave fairly to the other. So the evidential burden then shifts to him. It is for him to produce evidence to counter the inference which otherwise should be drawn."
"He would normally discharge that burden - as, for instance, now at least occurs in husband and wife cases - by showing that the Defendant entered into the matter with his will fully unconstrained, usually with the benefit of independent legal advice".
The Respondent's Notice: constructive trusts
The finding of undue influence
Undue influence as regards Fifty Farm and the adjacent land
Undue influence as regards Rose Cottage
The effect of setting aside the transactions: restitution
"If the transaction is set aside the plaintiff must also return what he received. Each party must hand back what he obtained under the contract. There has to be a giving back and a taking back on both sides."
"It is axiomatic that, when reversing this transaction, the court is concerned to achieve practical justice for both parties, not the plaintiff alone. The plaintiff is seeking the assistance of a court of equity, and he who seeks equity must do equity."
"The basic objective of the court is to restore the parties to their original positions, as nearly as may be, consequent upon cancelling a transaction which the law will not permit to stand. That is the basic objective. Achieving a practically just outcome in that regard requires the court to look at all the circumstances, while keeping the basic objective firmly in mind. In carrying out this exercise the court is, of necessity, exercising a measure of discretion in the sense that it is determining what are the requirements of practical justice in the particular case. It is important not to lose sight of the very foundation of the jurisdiction being invoked. As Lord Scarman observed in the Morgan case, a court in the exercise of this jurisdiction is a court of conscience. He noted "there is no precisely defined law setting limits to the equitable jurisdiction of a court to relieve against undue influence. Definition is a poor instrument when used to determine whether a transaction is or is not unconscionable: this is a question which depends on the particular facts of the case". As with the jurisdiction to grant relief, so with the precise form of the relief to be granted, equity as a court of conscience will look at all the circumstances and do what fairness requires. Lord Wright adverted to this in Spence v Crawford which was a misrepresentation case. He said regarding rescission and restitution: "the remedy is equitable. Its application is discretionary and, where the remedy is applied, it must be moulded in accordance with the exigencies of the particular case"".
Restitution as regards Fifty Farm and the adjacent land
Restitution as regards Rose Cottage
i) Mr Smith's payment of £15,000 cash, plus £800 for costs;
ii) his payment of £2,700 off the principal sum due under the mortgage by way of mortgage instalments;
iii) the contribution by Miss Cooper of the camper van, to be taken as worth £30,000, for reasons already explained;
iv) the repayment of the balance of the mortgage advance, namely £98,600 out of the proceeds of sale of Fifty Farm; and
v) Mr Smith's contribution of £16,000 in cash towards the cost of the renovation.
i) Mr Smith would be entitled to 8% of the net proceeds of sale of Fifty Farm, as held by the solicitors (namely £6,400, plus a corresponding share of any interest accrued).
ii) Miss Cooper is entitled to the rest, giving credit for what she has already received.
iii) Mr Smith is to be treated as having contributed towards Rose Cottage 8% of the £98,600 paid out of the gross proceeds of sale in redemption of the mortgage, namely £7,888 (say £7,900). Added to the £34,500 already identified, his contribution to acquiring Rose Cottage would have been £42,400.
iv) The balance of the £163,100, namely £120,700, would have been Miss Cooper's contribution.
v) It would follow that Mr Smith would be entitled to a beneficial interest of 26% in Rose Cottage, and Miss Cooper to the balance of 74%.
I emphasise that these figures are no more than illustrations, depending on what percentage is to be taken as Mr Smith's proportion of Fifty Farm as a whole, as mentioned in paragraph  above.
Lord Justice Wilson
Lord Justice Jacob