Smith v Cooper
Court of Appeal
Citations: [2010] EWCA Civ 722; [2010] 2 FLR 1521; [2010] 2 FCR 551.
Facts
Ms Cooper purchased a bungalow for £84,800. She entered into a relationship with Mr Smith, and later added Mr Smith to the title for the bungalow as a joint tenant. At the same time, the couple bought an adjacent plot of land for £9000. At a later date, they bought a cottage for £115,000. They paid for this using £15,000 of Mr Smith’s money and a mortgage secured on the bungalow.
Mr Smith and Ms Cooper later broke up. Ms Cooper sought to have the declaration of joint tenancy on the bungalow set aside for undue influence. She argued that Mr Smith had a position of ascendancy over her as he dealt with all the financial matters in the relationship. Meanwhile, the transaction was not readily explicable. In light of this, Ms Cooper argued that Mr Smith’s beneficial interest in the cottage was quite small. Mr Smith responded that Ms Cooper had been properly advised by a solicitor, so she entered into the transaction freely. This solicitor acted jointly for the couple.
Issue(s)
- Could Ms Cooper establish a presumption of influence?
- Did the solicitor’s advice rebut the presumption of undue influence?
Decision
The court held that Ms Cooper had a relationship of trust and confidence with Mr Smith. The bungalow transaction was not readily explicable, which raised a presumption of undue influence.
The solicitor’s advice was inadequate to rebut the presumption of undue influence. The solicitor failed to consider that there may be a conflict of interest in acting for both clients. He was also not aware of the underlying circumstances affecting Ms Cooper and it did not occur to him that she needed greater protection. His advice was not therefore capable of freeing her from any undue influence.
However, the transfer of the bungalow and the purchase of the adjacent land was effectively part of the same transaction. This meant that it would not be fair to split the land 50/50. The court therefore awarded Mr Smith the full value of the adjacent land as a condition of setting aside the bungalow transaction.
Since Ms Cooper solely owned the bungalow used to acquire the mortgage, her contribution to the purchase of the cottage was far greater than Mr Cooper’s contribution. Taking into account other financial contributions that Mr Cooper had made, the court declared that he owned only 26% of the beneficial interest in the cottage.
This Case is Authority For…
To establish a presumption of undue influence, the claimant must show that they had a relationship of trust and confidence with the defendant. The court will then consider whether the gift is readily explicable by normal motives such as friendship, charity or the relationship. If not, the burden shifts to the defendant to show that the claimant made a free, fully understood and independent decision.
Other
One way of rebutting the presumption is showing that the claimant was properly advised. However, the court is unlikely to consider the advice sufficient if the solicitor acts for both parties and is not aware of the circumstances which might give rise to undue influence and adapt his advice accordingly.
