Hayer v Hayer

This is my judgment on the argument that we have heard on this appeal this morning on grounds 1 and ground 2. By those grounds the appellant seeks to set aside the exercise by the judge of the power to permit an amendment to the defence in this action and his refusal to permit an adjournment to adduce further evidence.

By way of brief opening summary I will explain briefly the nature of the case. In 1996 the father of the respondent, Mr Jagdish Singh Hayer ( “Jagdish”), transferred a property known as 19 Russell Road to the respondent by deed of gift and at the same time a trust deed was executed, ostensibly by Jagdish and the respondent. That trust deed purported to create a trust over 19 Russell Road under which the respondent would hold the property in equal shares for himself and his son Parminder, who is the appellant in these proceedings, the claimant in the proceedings below.

The transfer by way of deed of gift from Jagdish to the respondent was not in fact a gift but a transfer for value. The appellant commenced these proceedings in 2009 in order to seek an order for the sale of the property. Although the respondent denies that he ever signed the trust deed, the judge found on the balance of probabilities that he did sign it. The judge, however, proceeded to set aside the trust deed on the basis that it had been procured by undue influence by Jagdish. The defence of undue influence was raised by amendment for the first time on the sixth day of the trial following concerns expressed by the judge himself on the fifth day. As I have said, the appellant seeks by grounds 1 and 2 to have the judge's permission to amend the defence to introduce this claim set aside and also to challenge the judge's refusal to permit him to adduce further evidence.

I start with the defence in this action. It is at the bundle at page 119. So far as relevant the plea in relation to the trust deed is that it is denied that it was entered into by the respondent and it is denied that the signature on the trust deed is that of the respondent. The defence avers that the signature which purports to be that of the respondent is a forgery.

At the trial we are told that the evidence started on the afternoon of the first day, which was a Monday, and continued until the end of the morning on the fifth day, which was the Friday. The closing submissions then began and when Mr Sefton-Smith, who appears on this appeal and appeared at the trial for the respondent, started his submissions the judge intervened to express concerns that he had about whether the defendant had understood the transaction into which he had entered in the trust deed.

I should say that Mr Woodhouse, who appears for the appellant, makes no criticism of the judge. The position, as related in his skeleton argument because we have no transcript of the exchanges, is that the judge gave an indication that he had concerns whether the respondent might have been subject to undue influence by his father and that there was then some discussion that took place. The respondent's counsel sought and was granted an adjournment over to the following Monday to enable him to consider his position.

Mr Sefton-Smith communicated a draft reamendment to his defence over the weekend. On the Sunday evening and on the Monday morning, that is day 6, he applied to amend the defence.

The draft re-amendment to the defence is in terms of paragraphs 17 and 18, which are set out at page 144 to 145 of the bundle:

“Alternatively, if, which is denied, the alleged Trust Deed was (a) settled and engrossed by King Prior & Co solicitors in 1997 and (b) duly executed by the Defendant on or around 16^th December 1996, the Defendant will contend that the Trust Deed is unenforceable and/or liable to be set aside because:

(i)

the Defendant reposed trust and confidence in the vendor, Jagdish Singh Hayer, and acted under his direction to the extent that any such Trust Deed was executed under his undue influence;

(ii)

during the antecedent meeting with King Prior & Co, Jagdish Singh Hayer gave express instructions to the solicitor which falsely represented that the transfer of the Property was ‘a gift’ and not for valuable consideration;

(iii)

as a result of the said misrepresentation, King Prior & Co did not and were not obliged to give the Defendant advice as to the otherwise inexplicable disadvantage he might suffer upon executing the Trust Deed;

(iv)

consequently and further, if the Defendant signed the Deeds of Gift and/or Trust then he did so without proper knowledge or understanding of their effect save that he believed they transferred the Property into his own name.

18.

By reason of matters aforesaid, the Claimant cannot reply upon the strict terms of the Trust Deed and is estopped from doing so; or in the alternative the Trust Deed should be set aside; or in the further alternative the Trust Deed is wholly or partially unenforceable as against the Defendant.”

When the application was made, the respondent did not withdraw the case, which he had already made plain and maintained in his evidence that his signature to the trust deed was forged. The appellant for his part opposed the adjournment. The appellant submitted to the judge that it was too late to permit the amendment. There had been no earlier indication that this plea of undue influence was made and that was a deliberate choice. Secondly, the appellant submitted to the judge that the proposed amendment was not only inconsistent with the defendant's pleaded case but also inconsistent with his written and oral evidence, because the defendant was adamant that he had never signed the trust deed and he had refused to accept under cross examination that there was any possibility that he would have signed it. He also refused to accept that there were any circumstances in which he would have agreed to hold the property on trust for one only of his children.

The appellant also argued before the judge that the proposed amendment was a wholly new case, and fourthly and importantly the appellant submitted that the preparation of the claim and the cross-examination of the defendant's witnesses including Mr Prior, the solicitor who had acted in the preparation of the deed of gift and trust deed, and a Miss Ray would have followed a completely different course had there been a defence of undue influence. The appellant also submitted the claimant had not investigated or obtained evidence or cross examined any witness as to actual undue influence or as to presumed undue influence. The claimant had not challenged the defendant's presentation of himself as someone who works with his hands and not with his head and that he was a person who did whatever his father had told him to do.

The appellant also submitted that the claim should be adjourned to enable the claimant properly to deal with the new case if the amendment was admitted. The appellant should be allowed, it was submitted, to obtain further witness statements of fact and to obtain proper expert evidence as to the valuation of the property in 1996. It had been valued, as I shall shortly come to, by a jointly instructed expert, but on the appellant's case that part of the valuation was in response to a supplementary question asked by the respondent's solicitors and outwith the permission granted for expert evidence. No issue had been taken at the time as to that as it was a matter then of merely peripheral importance.

Thus the judge indicated that he wanted to hear all the submissions, so closing submissions were completed and the judge indicated that he would deal both with the question of the amendment and adjournment and with other matters in his judgment, which he gave the following day.

I now turn to the judge's judgment and set out more fully the background in this case. I should say that the judge gave a long judgment and it is not going to be necessary for me to go through all aspects of it to deal simply with grounds 1 and ground 2. There is some complex background as to dealings of property by this family and as to relations with other members of the family, which it will not be necessary for me to set out in detail.

The background is, as I have explained, the appellant is the son of the respondent by the respondent's first marriage. The respondent is the son of Jagdish. The appellant had been brought up by Jagdish since he was a young age. His father, the respondent, had remarried and had by 1996 further children by his second wife. At the date of the trust deed the appellant was eight years old.

At paragraph 16 of the judge's judgment the judge holds that it had been the custom in this family and indeed the father had insisted on it that, when the sons earned money at any rate in their early years, they would pay the bulk of it, if not all of it, over to him, Jagdish. He organised the finances of the family and generally speaking his sons obeyed him and trusted him to arrange matters for their benefit. That was the judge's finding.

The judge went on at paragraph 19 of his judgment to record that the family had on all occasions in the 1980s and 1990s used the firm of Messrs King Prior Solicitors for their conveyancing transactions. He records that at the trial Mr Prior had been called as a witness by the defendant, that he had come under a witness summons and that nobody knew beforehand what precisely his evidence would amount to. As Mr Sefton-Smith put it in his argument to us, they had to hear his evidence “blind”. The judge said that he found that Mr Prior was a perfectly likable, sensible and straightforwardly competent solicitor of integrity as one would expect. However, he was handicapped by having no file from 1996.

Mr Prior took the view that in 1996 his client was the respondent and not Jagdish. He explained that in his oral evidence that when approached by a donor and doneee, which he believed Jagdish and the respondent to be, he would ordinarily inform the donor that he should take independent legal advice and would thereafter act for the donee at completion and registration.

Jagdish had no recall of having received any letter mentioning independent legal advice. Mr Prior's evidence was that he had no actual recall of anything to do with the trust deed including the drafting of the trust deed.

The judge accepted the evidence of the respondent that Mr Prior's instructions had come from Jagdish. He was also satisfied that the respondent met Mr Prior twice, once to be introduced by his father to Mr Prior and on the second occasion when he went to Mr Prior's office to sign some documents accompanied by his wife, who later that day went herself alone with some identity documents to sign something more.

The judge described the respondent as a witness. The judge said that he struck him as “a man of slow thought” but he was “direct in his answers and simply did not have that cunning or guile to colour the straightforward manner of his speaking to the point apparently acquired in his early years in Newcastle-Upon-Tyne. As he said, ‘I work with my hands, not...” and he then pointed to his head.”

The judge went on to refer to the fact that the trust deed was stamped at a later date on the 1 May 2001. This factor remained a mystery. The judge did not make any finding and there was no explanation at the trial as to why the trust deed was stamped at that later date. By the date of the trial the original trust deed had been lost and the document which the parties had was merely a copy of it. The document was, however, submitted to Dr Audrey Giles, described by the judge as a “very distinguished handwriting expert”, and the view of Dr Giles, as I have said, was that the signature on the trust deed was that of the respondent.

The judge then deals with the point that consideration was paid for 19 Russell Road whereas Mr Prior had been told that it was a gift and that is why he had drafted a deed of gift. The judge at paragraph 38 says this:

The judge then goes into that issue and he holds that the signature, on the balance of probabilities, was that of the respondent. In reaching that conclusion, he bears in mind that the signature was witnessed by a legal secretary, Tim Prior, and in addition that Dr Giles's report supported the view that the signature was that of the respondent. So the judge decides that matter on a balance of probabilities in favour of Jagdish.

At paragraph 41 the judge goes on to say that he considered that there was scope for confused thinking and misunderstanding and that it was probable that two different notions featured. The first notion was that there was an arrangement in the house or in the home of the parties under which no doubt Kushvinder envisaged that one day Parminder would acquire some interest in number 19 and maybe in some other property. That was one matter. The judge held that the second notion was that there was an instruction in fact by Jagdish to King Prior, which was not known in detail that there was to be a gift by Jagdish to each of Kushvinder and Parminder in half shares.

The judge went on to reject the case put forward by Jagdish that the interest which Kushvinder acquired as a result of the deed of gift and trust deed was a half interest. He paid simply half the value of 19 Russell Road because its true value was £120,000. In fact he revised that view down to £100,000, but the judge noted that the joint expert had found that the value of the property in 1996 was approximately £70,000 and the judge went on to hold that the evidence of Jagdish was contrived and he rejected it. He accepted the defendant's evidence that the value of number 19 was in no way discussed or agreed upon or treated as being an essential element of what was agreed at the time. The judge, therefore, was critical of the evidence of Jagdish. He much preferred the evidence of the respondent.

At paragraph 49 the judge examined "the true nature of the transaction". The judge considered that this had never been disclosed properly to King Prior and he noted also that the respondent had convinced himself that he had never signed the trust deed. The judge went on to hold:

The judge then went on to deal with a number of further points which Mr Woodhouse had raised including a point about the amount of mortgage instalments paid in respect of No 9 St James's Avenue. That was mentioned in the course of argument but not expanded on and I do not propose to say more about it. The judge further records that Mr Woodhouse had submitted that the valuer's opinion was not what the valuer had been jointly instructed to do. The judge went on :

The judge then said this about the later amendment. He accepted it was a very late amendment, but as against that he considered that justice had to be done and that the consequences could be dealt with in costs. He then said that there might have been difficulty in obtaining instructions from the defendant about what he had described in his judgment as "a somewhat suspicious plea". He accepted, though, that it was a new defence and he added that there was much to support it and one could see from the number of paragraphs which he had mentioned in the statement of the defendant of raw material on which a defence is to be and could have been based.

The judge then summarised the position at the start of paragraph 59 in these words:

And then I need not read further except at the end of the paragraph the judge accepts that “lawyers and judges in court every day are apt to overlook the appalling strain litigation occasions to the ordinary man, particularly a defendant who is not a party who chooses to go to court.”

So the judge thereupon refused the application for an adjournment and permitted the amendment. He then went on to deal with the substance of the plea and he held at paragraph 63:

The judge then concludes his judgment with two important paragraphs :

I can deal with the submissions on this appeal on grounds 1 and 2 quite shortly. Mr Woodhouse relies on an authority, which was not cited to the judge, namely the recent decision of this court in Swain-Mason v Wills and Reed [2011] 1 WLR 2735. In that case this court held that a court should be less ready to permit an amendment where it is sought to be introduced at a very late stage. The party seeking to amend in those circumstances, in the case of a very late amendment, must in the words of this court, discharge a very heavy onus. In particular Mr Woodhouse relied on paragraph 82 of the judgment of Lloyd LJ with whom Elias LJ and Patten LJ agreed. Lloyd LJ held at the end of the paragraph that a party putting forward a late amendment should support their case for justifying the amendment "...with evidence as to why the application was made at this extraordinary late stage".

Lloyd LJ also deals with the need for a person making an application for a late amendment to set forth the amendment in very clear terms which comply with the laws as to pleading. But Mr Woodhouse has very properly not taken any point on the form of paragraph 17 of the re-amended defence.

In the Swain-Mason case the application for the late amendment appears to have been provoked by a ruling by the judge that the case as pleaded would not be capable of leading to success in the action, but Lloyd LJ held, in agreement with Elias LJ and Patten LJ, that that was a matter which the claimant's advisers should have foreseen and therefore that would have not justified of itself a late amendment. Mr Woodhouse submits that the amendment in this case was inconsistent with the existing defence and with the evidence that had been given by the respondent at the trial. There was also no evidence as to why the application was being made at the late stage and why the case had not been previously put forward. There was no indication in the witness statements theretofore that any such defence would be run if it had been provoked by the evidence of Mr Prior which, as Mr Sefton-Smith said was heard blind, the application should have been made shortly after that evidence was given which was in the first few days of the trial. There was in fact no proper explanation as to why the application was made so late at all. As to the judge's refusal to allow him to recall witnesses or to call fresh evidence, Mr Woodhouse repeated the submissions which he made to the judge. He submits, for instance, that he would have wished to cross-examine Mr Prior as to his practice when a party was about to execute a trust deed and become a trustee. In addition he would have wished to submit further valuation evidence or at least consider whether to do so and he would have wished to investigate further the circumstances of the entire transaction in order to establish that, despite the apparent disadvantage to the respondent, it was indeed a perfectly ordinary and proper transaction.

Mr Sefton-Smith, who appears pro bono for the respondent, warns against coming to a different conclusion from that of the judge in the absence of transcripts of the exchanges between the judge and counsel which lead to the formulation of the re-amendment. I do bear that point very much in mind in favour of the respondent, but we do not have the precise words the judge used. Mr Sefton-Smith accepts that his client never withdrew his case on forgery. That was and remained his primary case. It was his client's instructions that he did not sign the trust deed and those instructions were not withdrawn and there was no wavering in them. He submits that the judge recognised the difficulty in this situation. That appears from some of the passages which I have already read from the judgment. He submits that if the judge came to the view that the defendant had foolishly persuaded himself that he had never executed the trust deed and given firm instructions to that effect to those representing him, which would prevent his case from succeeding, it was still open to the judge to take a view as to whether an alternative case would succeed and was open to on the evidence.

I now turn to my conclusions on the submissions which we have heard. It will be noted that the amendment in this case was provoked by the judge's observations. It is, I think, difficult for a judge to give indications to any party about how to conduct the case without seeming to be partisan, but it can be done. But if a judge is going to give an indication of any kind he must leave it entirely to the parties as to whether they wish to follow up on his indication. The judge was thus entitled to ask whether the respondent proposed to run any new case following the hearing of the evidence. I bear in mind, as I have said, we do not have a transcript of precisely what the judge said, but I have no doubt that he would have been going beyond his function if he had suggested in any way that a particular case was a case which the respondent ought to run. That would have been, as is sometimes put, to descend into the arena. The judge must remain outside the arena in order to conduct the trial impartially.

In this case the judge, having given what he no doubt thought was a helpful indication, was then faced with having to decide an application as the impartial judge effectively to follow up on his indication by amending the pleadings to introduce the point he had suggested. When such a thing happens the judge must bear in mind the point he thought of was not necessarily a good point especially if it has not occurred to the parties themselves, but he has to be satisfied that it is in the interests of both parties to accede to the amendment and that it is proper in the exercise of his discretion to permit the amendment.

Mr Sefton-Smith, who has conducted this appeal with great skill, fairly accepted that the amendment would not have been made unless the judge's indications had been given. Mr Sefton-Smith also made it clear that he did not propose to call any evidence himself in support of the amendment intended that the matter should be dealt with by the judge making appropriate inferences.

I have no doubt that, even if the judge's exercise of discretion to permit the amendment was unimpeachable on appeal, he was wrong not to give the claimant the opportunity of testing the evidence of the witnesses who had already given such evidence such as Mr Prior and Jagdish as to whether there had been any undue influence. This was a new case. The appellant was also entitled to formulate a case as to whether, despite what it seemed on the face of it, the transaction was not in fact disadvantageous and was capable of being a perfectly proper explanation. It was apparent from the final sentence of paragraph 65 of the judge's judgment that the judge accepted, as indeed is the case, that this is a proper issue on a case of undue influence. Where I differ from the judge is his decision to make a finding on that point without having given an opportunity to the appellant to consider his case and put forward any fresh evidence on that point. I accept Mr Woodhouse's submission that it was unnecessary for him to challenge the valuation of the property in 1996 until the plea of undue influence was raised. In my judgment the question of the value of the property was relevant to the issue at the end of paragraph 65 of the judgment, that is, to know whether the transaction was in fact disadvantageous to the respondent. The appellant was also in my judgment entitled to put to Jagdish the allegations which were now being made that he had exerted influence on the respondent to execute the trust deed in order that that matter could be fairly and squarely dealt with by the witness. I appreciate that the judge felt that there was no likelihood that there would be any further evidence of any value to him, but that is not a matter in my judgment which the judge was entitled to determine. This was a question of whether there could be any fair trial of the plea of undue influence without the appellant having the opportunity to call evidence to rebut it.

Accordingly on this basis I would accede to ground 2 of the grounds of appeal.

I now turn to the much more difficult question of whether there should have been leave to amend at all. The mere fact that there would have to be an adjournment for the claimant to consider his position would not mean that there could not be a grant of permission to amend if that matter could be compensated for in costs. I also, for my own part, am minded to agree with the judge's point that it was possible in theory for a party to say that he did not accept that he signed the document but that, if he was wrong on this, he was unduly influenced to sign it by virtue of pressure applied by another person. However, it is certainly a difficult plea to run since the alternative case involves undoubtedly accepting that one was wrong on the first case that was put. I would therefore not go so far as to say that by pleading that the document was a forgery and deciding not to withdraw that pleading the respondent had made an election which prevented and disentitled him from putting forward an amendment which he sought to make in paragraph 17. I also accept that the judge could find undue influence from inferences and without express evidence to that effect.

Much more troubling, however, in my judgment is the fact that the respondent himself would give no evidence to support the claim of undue influence. It would be left entirely to inferences to be drawn by the judge. There would, as I see it, have to be inevitable inferences.

Moreover there was no satisfactory explanation as such as to why the application for permission to amend had not previously been made. It was obvious in fact that it was only being made because the judge had indicated that he had concerns, and that, therefore, there was a possibility of success on this point. The decision therefore to apply for leave to amend was tactical to take advantage of that indication.

Furthermore there was no no evidence at all that Jagdish had instructed the respondent to execute this trust deed or that he had instructed Mr Prior to persuade the respondent to execute the trust deed. The only evidence there was was the fairly general evidence in paragraph 16 on which the judge made findings that the sons in general did what their father, Jagdish, wished them to do. However, as Mr Sefton-Smith very properly accepts, the evidence of the respondents was that he did not always do what his father asked him to do. That was his positive evidence. The evidence supporting the inference on which the judge relied was principally the misrepresentation to the solicitor. There was no case in misrepresentation, however, pleaded by the respondent. In any event, as I have said, it was not said that Mr Prior was the person who, at the request of Jagdish, improperly persuaded the respondent to sign the trust deed. It was, therefore, on the evidence as it stood not an obvious or easy case of undue influence in the first place. Mr Sefton Smith properly accepts that, if his client had been recalled on the issue of the re-amendment, he would have stuck to his case that he did not execute the trust deed anyway.

In this situation of a late amendment the question of fairness has to be considered. As this court said in Swain-Mason, it is necessary to strike a balance between the parties. Any amendment would result in the appellant having to take steps to meet the new case. The case could not be resolved at the trial, which had taken place and which had occupied many days. The judge was satisfied that the litigation brought substantial strain on the parties and that it had been very costly. He took those considerations into account in refusing the opportunity to adduce further evidence or cross-examination or recall witnesses for cross-examination. These considerations were, however, considerations which were equally relevant to the question whether there should be permission to amend at all. In my judgment, accepting as I do the judge's assessment of these matters, the judge should have given them the same weight in relation to the question of permission to amend in the first place. Added to that fact is the fact that the amendment was very late and without satisfactory explanation. In those circumstances, I do not consider that the judge's exercise of his discretion to permit the amendment took into account all the relevant considerations or that it can stand. I would, accordingly, set it aside. I bear in mind that this means that the case of undue influence will not be heard, but the answer it seems to me to that point is that it was not a defence which the respondent intended to run in the first place. It was, as I say, a tactical decision to run it in the light of the judge's indications only.

So it falls, as it seems to me, to this court to re-exercise the discretion. It seems to me that it clearly must be exercised in favour of refusing permission to amend for the reasons that I have given, it being very late, it having been produced without proper explanation as to why it was late and there being no evidence as to the exertion of influence in relation to the execution of the trust deed.

Finally, I would add that there was a point run on the written argument that no amendment was necessary to the amended defence to enable this point to be raised. Mr Sefton-Smith did not deal with this point in his oral submissions. In my judgment there is no substance in it. The case on the trust deed on the pleadings was that it was a forgery, neither more nor less. In those circumstances I would allow the appeal on ground 1 and also, if necessary, on ground 2. This means it is unnecessary, in my judgment, for the court to deal with the remaining grounds of appeal.

I agree.

I also agree.