Undervalue transaction unravelled by Undue Influence
We all hope that our lifetime wishes are honoured after our death. However, sometimes transactions can fall under the scrutiny of the court when there are concerns of undue influence.
Undue influence arises when one person takes unfair advantage of a position of power over another person. Presumed undue influence arises where there is a relationship of trust and confidence and also a transaction that calls for an explanation. In many cases this is a significant gift, often of property. It is then for the recipient of the alleged gift to show there was no undue influence.
The recent case of Moursi v Doherty  EWHC 830 (Ch) demonstrates how the Court has the power to set aside lifetime transactions after death when undue influence has been established. To ‘set aside’ a transaction, means that it will be cancelled or annulled, as if it never took place.
In Moursi v Doherty the claimant was the daughter of Ann Gurney (acting as the personal representative of her estate) who died on 27 March 2017, aged 85. The defendant was Mr Doherty, who Mrs Gurney had met in the late 1990s and built up a friendship with whilst dog walking.
Mrs Gurney purchased a property, 2 Orchard Close, in March 2006 for £238,500. In 2010, Mrs Gurney hired Mr Doherty to carry out works at Orchard Close and they formed a close relationship. At this stage Mrs Gurney was aged 78 and the defendant was 45 years her junior. During the proceedings, there was some disagreement between the claimant and defendant regarding the nature of the relationship.
By 2012 Mrs Gurney had sold Orchard Close to Mr Doherty for £70,000. Mr Doherty then he executed a declaration of trust giving her a beneficial interest in Orchard Close for the rest of her life. At the time of the sale, the Property was valued at £275,000, or £191,500 when subject to the life interest granted. A sale at £70,000 was therefore at a considerable undervalue.
The solicitors acting in the sale had been told by Mrs Gurney that she was in a state of financial trouble and wanted to sell her Property to Mr Doherty as they loved each other. Mrs Gurney had envisaged that she would have a lease for 10 years, renewable for another 10 years, though at the time of the transfer she was granted a life interest by Mr Doherty. The evidence showed that Mrs Gurney was in fact in a good financial position at the time of the sale, despite what she told the solicitors.
Mrs Gurney also lent Mr Doherty at least £15,300 and gave him a valuable watch and bracelet that belonged to her husband; a combined value of nearly £64,000.
After the sale of Orchard Close, Mr Doherty continued to help Mrs Gurney with her shopping and visited her when she was in hospital. Evidence indicated Mrs Gurney telephoned Mr Doherty repeatedly. There was also evidence suggesting Mrs Gurney envisaged a sexual relationship and marriage with Mr Doherty, though he denied this.
Following Mrs Gurney’s death, the claimant made an application for summary judgment to set aside the transfer of Orchard Close to Mr Doherty due to presumed undue influence. Summary judgment can be applied for where the defendant has no realistic prospect of success in defending the claim and there is no dispute about the material facts of the case. A judgment can then be made without a full trial. For this reason, successful summary judgment applications are rare.
Expert evidence confirmed Mrs Gurney was probably developing dementia at the time of the sale of Orchard Close. Although the expert was not able to say Mrs Gurney lacked capacity to sell her property, he was of the opinion she was vulnerable to undue influence based on various risk factors.
The court supported this view confirming that it was clear Mrs Gurney had trust and confidence in Mr Doherty based on the evidence, including the gifts, phone calls and letters. Further, the sale of Orchard Close called for an explanation. The Court held that presumed undue influence was made out, even when the case proceeded on Mr Gurney’s version of events.
There was no evidence to rebut the presumption of undue influence to show Mrs Gurney had given full, free and informed consent to the sale. She had not received independent legal advice on the sale, as the solicitor had acted for Mr Doherty in the transaction.
The Court heard that Mr Gurney had previously, when he was 28 years, been involved with a 57-year old suffering from early onset dementia. He had purchased the woman’s home at an undervalue, granting her a life interest in the property, not five years before the start of his relationship with Mrs Gurney.
The court ruled that the defendant had no realistic prospect of defending the claim if it were to proceed to trial and granted summary judgment to set aside the sale of the Property.
If you are concerned that someone you know may have been subjected to undue influence please contact our Contentious Probate team to discuss it. Emma Saunders is a Senior Associate specialising in lifetime gift disputes and contentious probate matters and can be contacted on 0191 226 3293 or at firstname.lastname@example.org.