Hackett v Crown Prosecution Service & Anor

Prior to 27 August 2004, David Hackett (“the second defendant”) imported cigarettes, tobacco and a small quantity of beer without paying the prescribed duty. On 4 May 2007, a confiscation order was made against the second defendant under the Criminal Justice Act 1988 (“CJA 1988”) in which his benefit was stated to be £645,050.67 with his realisable assets being in excess of this sum; they were described as being “considerable and varied”. Thus a confiscation order was made in the sum of £645,050.67 of which £200,000 was payable within 28 days and the remainder was payable within 6 months. On 17 October 2007, an appeal against the confiscation order was dismissed by the Court of Appeal (Criminal) Division. As at 15 December 2008, £514,491.05 had been paid pursuant to the confiscation order.

The issue on this application relates to the ownership of 2 New View Cottages, Old House Lane, Roydon, Essex (“the house”). It was bought by the second defendant’s mother, Mrs Violet Hackett (“the claimant”) and the Land Registry records that it was registered in her name on 2 December 1998 but it was transferred by her to the second defendant on 12 October 2004 for no consideration. The claimant contends that this transfer to the second defendant should be set aside on the grounds of presumed undue influence of the second defendant and/or non est factum on the basis that when the claimant signed the transfer of the house, she did not know what the document was. The second defendant supports this application but the Revenue and Customs Prosecutors Office now the Crown Prosecution Service (“CPS”) contest it on the basis first, that the house was purchased with the proceeds of the second defendant’s criminal activities and second, that the claims of presumed undue influence and/or non est factum cannot succeed.

In June 2007, a restraint order was granted against the Second Defendant in relation to his assets, which included the house. The order was subsequently varied and on 28 November 2007, it was further varied to permit the sale of the restrained assets, which included the house. During 2008, there was correspondence between the representatives of the CPS and the second defendant’s advisers and on 19 November 2008, the CPS wrote to the second defendant indicating their intention to return to court for the appointment of a Receiver, who would take possession of the second defendant’s assets and then realise them.

On 26 November 2008, Messrs Crane Staples acting on behalf of the claimant wrote to the CPS raising issues on the capacity of the claimant to transfer the house to the second defendant in 2004. An application by the CPS for the appointment of a Receiver was adjourned on 29 January 2009 so as to enable the claimant to pursue her claim that the transfer of the house in 2004 to the second defendant should be set aside.

There are now two applications before the court of which the first is an Enforcement Receivership Application made by the CPS under the CJA 1988 against the second defendant’s realisable property, including the house. There is also an application by the claimant that the transfer of the house from her to the second defendant should be set aside on the grounds of presumed undue influence of the second defendant and/or non est factum on the basis that when the claimant signed the transfer of the house, she did not know what the document was. The second defendant does not oppose the claim brought by his mother but the CPS does oppose it.

It is common ground that if the claimant’s application to set aside the transfer of the house fails, then an Enforcement Receiver can be appointed over the house. So the critical issue to be determined on this application is whether the transfer of the house by the claimant to the second defendant should be set aside.

The claimant was born on 11 June 1927 and she is now 83 years of age. She developed jaundice at birth and this left her profoundly deaf. In consequence, the claimant did not learn how to speak and whatever education she had, it was of the most rudimentary type. According to her sister, Mrs Rose Savage, the claimant “is unable to read or write”. She understands only some basic signs of sign language, can do some lip-reading and she communicates with her hands.

The claimant married Mr Laurence Hackett, who was also deaf and they had three sons, of whom one is the second defendant. Mr Hackett senior worked initially as a coalman and latterly as a dustman until he retired in 1982, but in the afternoons when he worked in those jobs, he also engaged in some of his businesses, which he continued after his retirement. I will have to return to explain the evidence relating to those businesses.

The claimant worked as a cleaner before her retirement, although there is evidence that she spent some years at home with her children and she was then not working. Her work as a cleaner was at a Nursery school with Haringey Council and also previously for Bassetts the sweet manufacturers.

Mr Hackett senior never owned a car and he and the claimant very rarely went on holiday. He died in January 1997 when the claimant would have been aged 69. Thereafter the claimant relied upon the second defendant to manage her financial affairs and on 18 June 2003, the claimant appointed the second defendant as her attorney with general authority to act on her behalf in respect of her property and affairs.

The case for the claimant was that at the time of the death of Mr Hackett senior in January 1997, he had accumulated savings of about £129,500, which were kept in cash at the home, which he shared with the claimant. After Mr Hackett senior’s death, the claimant arranged for her nephew, Mr Kevin Savage, to come to her home where she showed him the cash savings and he then organised for this sum to be immediately deposited in an account with the Nationwide Building Society (“Nationwide”) on 10 August 1998.

In December 1998, the claimant purchased the house for £124,995 using the money in the Nationwide. The title was registered in her name and so she became the beneficial owner of the house. An important issue, which has to be resolved on this application, is to ascertain the source of the cash deposit at Nationwide, which was used for the purchase of the house. It is significant that the judge at the confiscation hearing held that in the absence of any evidence, the second defendant had failed to discharge the burden of rebutting the assumption that the house had been purchased with the proceeds of crime with the consequence that the property was to be regarded as an asset of the second defendant. It will be necessary to return to consider later in this judgment the significance of what happened during the confiscation proceedings both before the judge and the Court of Appeal (Criminal) Division. Important issues on this application are first, whether the claimant’s case is correct and that the source of the purchase money for the house was legitimate being the savings of Mr. Hackett senior and second, whether the CPS are correct in contending that the purchase money for the house was the product of the second defendant’s criminal activities.

As I have explained, the claimant signed a Power of Attorney in favour of the second defendant on 18 June 2003. The second defendant did not invoke his powers under this appointment to transfer the house in 2004 to himself. In his evidence, the second defendant said that he had not realised that this would have enabled him to arrange the transfer of the house from the claimant to him. There has been no suggestion that the Power of Attorney has been misused.

On 27 August 2004, the second defendant was stopped by the customs authorities and he was arrested as a significant amount of smuggled goods were found in his possession on which the import duty, which was payable was approximately £50,000. In October 2004, the second defendant arranged for the claimant to see a solicitor, Mr Stevens of Duffield Harrison LLP for the purpose of arranging for the claimant to transfer the title of the house into the sole name of the second defendant for no consideration. She saw him on 4 October 2004 in the company of the second defendant and of a deaf friend of the claimant, Miss Copsey, when the transfer was discussed and I will return in paragraphs 76 and 77 below to consider the evidence of what occurred at the meeting. On 6 October 2004, Mr. Stevens sent a letter to the claimant together with a copy of the transfer, which she duly signed and which was returned to the solicitor. It was dated 12 October 2004 and in paragraphs 78 and 88 below, I will summarise the evidence on how it came to be signed. The title to the house was then duly registered in and remains in the name of the second defendant. Neither the claimant nor the second defendant has lived in the house, which has been let.

The background to this application is not in dispute and it is that a receiver can be appointed over realisable property and the appointment of an Enforcement Receiver is discretionary (s.80 (2) CJA 1988). The court can empower the Receiver to realise the property in such a manner as it may direct (s.80 (5) CJA 1988). The court cannot confer on the Receiver the power of taking possession (s.80 (4) CJA 1988) and realising the property (s.80 (5) CJA 1988), unless a “reasonable opportunity” has been given for persons holding any interest in the property to make representations to the court (s.80 (8) CJA 1998).

It is settled law at this stage, that is open for a third party to assert a claim in relation to a defendant’s realisable property (see Re Norris [2001] UKHL 34). For those reasons, it is also common ground that this court has jurisdiction to consider the claimant’s contention that the transfer of the house to the second defendant should be set aside.

The main issues to be resolved on this application are whether the transfer of the house on 12 October 2004 from the claimant to the second defendant can be set aside first on the basis of presumed undue influence of the second defendant or second on the basis of non est factum. There is also a significant, and perhaps decisive, issue to be resolved first which is whether the money in the Nationwide account which was used to purchase the house came from the savings of the claimant’s husband or from the criminal activities of the second defendant. The significance of this issue is that it is accepted by all parties that if the source of this money in this account was not the savings of the claimant’s husband, then it is clear that the source of this money must have been the second defendant’s criminal activities in which case the claim of the claimant will have to be dismissed.

The evidence, which was adduced at the hearing, comprised of four live witnesses, all of whom were called in support of the claimant’s case and a witness statement of the claimant, who was not called to give evidence. The CPS did not call any witnesses. Before dealing with the issues, it is appropriate at this stage to explain my conclusions on the issues relating to the reliability of the evidence of the live witnesses and on the admissibility of the witness statement of the claimant.

The claim for presumed undue influence in this case is unusual because both the person, who is supposed to have exerted the presumed undue influence (namely the second defendant), and the victim of the undue influence (the claimant) are seeking to support the contention that the transfer of the house by the claimant to the second defendant can be set aside on grounds of undue influence. This is different from many cases of undue influence in which there is a dispute between the two parties, who occupy those roles, irrespective of whether the alleged presumed undue influence comes from a bank, a lawyer, a relative or a lover.

In consequence, it is incumbent on me to look with particular care at the evidence of the second defendant and to test whether it is corroborated or consistent with contemporaneous and other material. This is particularly so in this case as the second defendant will stand to lose the house to the CPS if the claimant fails in her action and so he has a powerful incentive to support the claimant’s case, although this would mean that there are fewer assets available to satisfy the confiscation order and so it might put the second defendant at risk of having to serve the default sentence of imprisonment imposed on him.

The claimant did not give evidence and it was sought to adduce her evidence under the provisions of the Civil Evidence Act 1995 (“the 1995 Act”), but the CPS objected on the basis that the prescribed notices had not been served within the prescribed periods. Mr James Fletcher for the CPS accepted that the CPS had not been prejudiced by not receiving the prescribed periods of notice, but he nevertheless contended that this evidence should not be admitted.

When I indicated that my preliminary view was that this evidence of the claimant should be admitted but on the basis that the CPS would be able to make submissions on the weight to be attached to it, Mr. Fletcher then agreed to its admission on that basis. This approach was correct as section 1(1) of the CEA provides that in civil proceedings “Evidence shall not be excluded on the ground that it is hearsay”, while section 4 of the CEA requires the court to have regard to any circumstance from which any inference can be reasonably drawn as to the reliability or otherwise of the evidence.

The statement of the claimant is very short, merely recording brief answers to questions put to her and the statement does not descend into any detail whatsoever. I am very conscious that the CPS has been unable to cross-examine the claimant, who is clearly somebody with a very limited memory as is shown by the contents of her witness statement. In those circumstances, I will not attach any weight to her evidence, except when it is corroborated by other evidence.

A major issue in this case is what weight (if any) should be attached to the evidence of the second defendant. Mr Fletcher says that his evidence must be approached with very great caution. He points out correctly that he is a convicted smuggler, who dishonestly evaded the duty payable on tobacco products on numerous occasions and with the various statutory assumptions, it was determined at the confiscation proceedings that he had benefited from his criminal conduct in the sum of £645,050.67.

Furthermore, Mr. Fletcher reminded me again correctly that in her judgment in the confiscation proceedings, the Recorder referred to various other ways in which the second defendant had acted dishonestly. They related to false claims for Income Support, an incorrect declaration of his income and assets for obtaining legal aid and his mistakes when claiming various occupancy benefits from Epping Forest Council. In appraising the reliability of the evidence of the second defendant, I took those matters into account and the significant fact that, as I have already explained, the second defendant had a vested interest in seeking to ensure that the claim of the claimant, who is his mother, succeeds so as to prevent the house falling into the hands of the CPS. Further, the claim to set aside the transfer of the house by the claimant to the second defendant was only made after the CPS stated that it was going to seek an order for the appointment of a Receiver to sell the house. All these matters have required me to look at his evidence with a very great caution.

A significant point raised by Mr Fletcher was that the second defendant had not raised the issues of either presumed undue influence or non est factum in his confiscation proceedings. When cross-examined about this, the second defendant stated that his legal advisors had advised him not to raise in those confiscation proceedings, the issue of the setting aside of the conveyance to his mother on the grounds that this conveyance was made before his offences occurred and so pre-dated the period, which his lawyers said was covered by the confiscation proceedings. The second defendant was asked why he had not given evidence in the confiscation proceedings and he explained that he had been advised by his legal advisers not to do so as first the Recorder did not like him and second that the relevant evidence could be adduced on his behalf by his expert accountancy witness, Mr. David Cohen, who indeed gave evidence in the confiscation proceedings.

The second defendant also explained when giving evidence on this application that he was very dissatisfied with the lawyers who had acted for him in the confiscation proceedings as they had let him down by not ensuring that the house was not made subject to the confiscation order. The evidence of the second defendant was that he had made complaints about his legal advisers in the confiscation proceedings to their professional bodies and to the Legal Services Ombudsman. He said that he suffered from mental problems and this prevented him making his complaints earlier. I was initially very sceptical as to whether I could rely on the evidence of the second defendant in the light of his dishonest activities and the other matters relied on by Mr. Fletcher including those to which I have referred, but I have come to the clear conclusion that the second defendant was a reliable witness, whose evidence I can and do accept. He emerged from a characteristically testing detailed cross-examination by Mr Fletcher unscathed and his evidence appeared consistent with other material. It was noteworthy that the second defendant did not exaggerate his knowledge or tailor his evidence in a way which might have assisted his mother’s case. So he did not falsely pretend to know matters, which might have helped the claimant’s case (such as by giving detailed evidence of the commercial activities and of the savings of his father) but instead he gave his evidence carefully and thoughtfully, explaining when he did not know information.

Many of the criticisms made by Mr Fletcher of the second defendant fail to appreciate or recognise that he is neither a sophisticated man nor a person of high intelligence, but in fact he is, if I may say so, really a rather simple person. His evidence has to be considered in that light. For that reason, I do not think that his evidence is undermined by the fact that he used the same barrister for his appeal in the confiscation proceedings to the Court of Appeal as before the Recorder or that his appeal to the Court of Appeal was not brought on the basis of negligent advice.

By the same token, I do not consider that any inference adverse to the second defendant can be drawn from the fact that he did not raise the issues of presumed undue influence or non est factum at any stage before the claimant’s present solicitors were instructed. I accept the evidence of the second defendant that after the attention of his brother Michael had been drawn to the transfer of the house to the claimant and that he thought it was wrong for the transfer to go ahead and that legal advice should be obtained. This led to the claimant’s present solicitors being instructed and the present claim being brought.

I have no doubt that the second defendant did not know until some time in or after November 2008 (as result of receiving legal advice), that the transfer of the property from his mother to him could be set aside on the basis of presumed undue influence or non est factum. After all, these are concepts of which no layman (and certainly not the second defendant, who is neither well-educated nor worldly) would have had, or indeed could possibly be expected to have had any knowledge.

In those circumstances and after considering these matters and all the points made by Mr. Fletcher on this issue, I have come to the conclusion that I can regard the second defendant as a witness whose evidence I can and indeed do accept. I was fortified in coming to that conclusion by his careful demeanour when he gave evidence.

It is also appropriate to mention for the purpose of completeness at this point that Mr Fletcher originally sought to contend that because the second defendant had not raised in the confiscation proceedings arguments and evidence to support the claims for undue influence or non est factum, this meant that he was now somehow estopped from raising either or both of these issues in the present application. After I had given Mr Fletcher an opportunity to research this point, he accepted quite correctly that there was no validity in this contention and indeed it has not been pursued.

I must now state my conclusions on the oral evidence, which was given by Mrs Rose Savage, who is the sister of the claimant, and by her two sons Clifford and Kevin, who are both mature and sensible adults. They were able to give some information relating to first the working life and activities of the claimant’s late husband and second what they knew about his assets as well as some background information relating to the claimant, the second defendant and his brothers.

These members of the Savage family all gave evidence to the best of their ability. They did not live with the claimant or see her very often, but they all kept in some form of contact with her. I have found them all to be careful and helpful witnesses, who did not seek to exaggerate their knowledge or to be partial in their evidence. Indeed I fully accept all their evidence. The CPS did not adduce any evidence.

As I have explained, it is clear that the money for the purchase of the house by the claimant came from her account at Nationwide, which was opened in August 1998. It is common ground that the source of this money could only either be, as the claimant contends to be the case, cash in the claimant’s home left by her late husband Laurence or, as the CPS contends to be the position, money which was derived from the criminal activities of the second defendant. It is not suggested that the second defendant could himself have acquired this money honestly or that the claimant could have obtained this money other than by using the money left by her husband.

It is, of course, accepted by Mr Ulick Staunton, counsel for the claimant that if the second defendant’s criminal activities were the source of the sum deposited in the Nationwide, then the claimant’s claims to set aside the transfer of the house to the second defendant must fail.

Mr Staunton pointed out that the earliest known evasion of duty by the second defendant was on 13 October 1998 and this was in respect of goods which had an estimated purchase price abroad of £2,500 and the duty evaded on those goods amounted to £12,068.18. Mr Staunton contends correctly that this offence was in itself insufficient to generate the sum paid into the claimant’s account at Nationwide. This, it is said by Mr Fletcher, shows an incorrect understanding of the way in which the statutory assumptions operate. It is noteworthy that in paragraph 5.8 of the prosecutor’s statement dated 25 November 2005, which was prepared for use at the second defendant’s confiscation proceedings, it was stated that the earliest occasion on which the payment of revenue was being evaded was 13 October 1998 but that:-

“Enquiries are ongoing to identify other journeys by the [second] defendant on which he was not intercepted by Customs officers”.

It is significant that those “ongoing” enquiries have failed to discover any other journeys in which the second defendant was involved in smuggling. Thus I must proceed on the basis that the first act of smuggling committed by the claimant occurred on 13 October 1998, which was two months after the sum of £129,500 was deposited in the Nationwide on 10 August 1998. This undermines the contention of the CPS that the Nationwide account consisted of the fruits of the second defendant’s criminal activities and it would mean that the source of that account could not be illegal. In consequence, the case for the CPS has to be rejected on that issue but I will give my conclusions on the other matter raised which was that the source of the money in the Nationwide account was the earnings of the claimant’s late husband.

On that issue, a significant point that is made by Mr Fletcher is that the allegation that the money in the Nationwide account originates from Mr. Hackett senior is of recent invention, but in the report dated 30 March 2006 and produced by Davis Bonley, the Chartered Accountants retained by the second defendant in the confiscation proceedings, it is stated that it had been made clear to them by the second defendant that there were a number of witnesses, who would be making statements in evidence to the effect that the funds in the Nationwide account originated from the second defendant’s late father. This report predates the restraint order made against the second defendant in June 2007 and which is referred to in paragraph 3 above.

Thus, it becomes necessary to see what evidence the claimant can put forward to show the source of the money. In her brief witness statement, she refers to her husband and herself having savings but she does not mention any money being put aside for her by her late husband nor does she refer to any cash being found at the property after her husband’s death. Indeed her evidence in her witness statement was that she does not know the source of the money, which was used to purchase the house other than that it was “my bank book”, which does not help to resolve this issue.

The claimant’s sister Mrs Rose Savage was unable to give direct evidence that the money paid into the bank account had come from the claimant’s husband, but in her evidence, she confirmed that she was aware of substantial savings held by Mr. Hackett senior because when she visited him in hospital not very long before his death, he made signs to her to show that the claimant would be taken care of after his death. Mrs. Savage explained very clearly and convincingly the way in which the claimant’s husband indicated first that he had about £150,000 and second that the claimant would be well-off.

Her evidence was that when the claimant’s husband wanted to communicate about money, he would rub the palm of his hand as if he was counting notes and then he would write figures in the air to specify the amount of money. In addition, he would point to himself to indicate that he was talking about himself and he would also point to other people to refer to them and then he would put his thumb up to indicate that something was all right. Using those signs, Mrs Savage explained that the claimant’s husband had indicated first that he had about £150,000 and second that by using the thumbs up sign, he indicated that the claimant would be well off. She said that she did not know where the money was but she assumed that it was in the matrimonial home.

It is true that Mrs Savage said that she never saw the money referred to by Mr. Hackett senior, but I found her to be a convincing and careful witness relating to what Mr Hackett senior had indicated to her about his savings. Her evidence is corroborated to some extent by her son Clifford Savage, who said that he had accompanied his mother to visit the claimant’s husband in hospital when he had indicated first the amount of money he had saved by putting his fingers up against his other hand and then mouthing the amount and second that the claimant would be well provided for. The claimant’s husband informed them in that way that he had £140,000 and he then indicated that it might be “perhaps £150,000”. Mr Hackett senior, according to Mr Savage, indicated that the claimant would be provided for by mouthing her name and then giving a “thumbs up” sign.

Clifford Savage’s brother Kevin Savage gave evidence that on about 10 August 1998, he was asked by his mother Mrs Rose Savage to go to see the claimant because of a problem she had with her dogs, but that upon his arrival at the claimant’s home, he was shown a holdall containing a large number of cash notes of various denominations and which were bundled together. His evidence was that he was concerned about this amount of cash being in the claimant’s house and that he had immediately arranged for the money to be deposited in the Nationwide. Kevin Savage explained that he had no prior knowledge of the source of the money and that he had only learnt about it from the claimant. A letter from Nationwide of 11 August 1998 shows that the sum of £129,500 had been deposited in the name of the claimant on the previous day.

I was concerned as to how Mr Hackett senior could have acquired this money as it could not have been from his employment first as a coal man and then as a dustman. Mrs Rose Savage said that Mr Hackett senior used to conduct other activities when he was not working in order to try to make money, such as collecting items and then trying to sell them rather like the character in “Steptoe and Son”. Mr. Hackett senior was described as a rag and bone man, who also used to go to stables to groom horses. It was said that after Mr. Hackett senior retired, he continued to work in this way and that he did so until he became ill.

The second defendant said that his father was involved in several businesses while working as a dustman, including delivering fruit and vegetables, delivering coal, working as a rag and bone man as well as buying and selling horses. It was pointed out that when he was a dustman, Mr Lawrence Hackett’s work finished by midday and so he had plenty of time during the remainder of the day to devote to his other businesses. The second defendant said that after his father had stopped his employed work in 1982, he continued to work in his own businesses until 1993 when he was 75. He also said that he has no knowledge of his father’s income and savings, although he knew that his father had savings, which passed to the claimant, but he had no idea of the amount involved until the claimant showed him her Building Society passbook for Nationwide. Kevin Savage said that on several occasions, he saw Mr. Hackett senior counting money at his kitchen table.

Mr Clifford Savage gave evidence that he could remember Mr Hackett senior always having something in the garden that he could sell and he referred to his uncle’s activities as being that of a rag and bone man as well as a buyer and seller of horses and someone who was paid for the grooming of horses of other people. Similar evidence was given by Mr. Kevin Savage, who said that he saw Mr. Hackett senior bringing home lots of metal which he then sold as well as buying and selling horses, running a fruit and vegetable cart and delivering coal. Mr. Clifford Savage considered that Mr. Hackett senior was a secretive person, who was involved in much dealing. There was unanimity among the witnesses first that Mr Hackett senior was very careful with his money and second that he rolled his own cigarettes very thin so as to make the tobacco last. There was also evidence that he did not have a car and that he rarely went on holidays. I was concerned as to why Mr Hackett senior did not put his money in a bank but Mr Clifford Savage explained to my satisfaction that Mr Hackett senior did not trust banks and therefore he did not use them.

Mr Fletcher carefully tested all this evidence adduced in support of the claimant’s case on this and all other issues in cross-examination, but I was left in no doubt that this evidence was true. I have come to the clear conclusions first, that Mr. Hackett senior earned substantial sums when he was not working for his employers; second, that he was a prudent man who spent little money on himself; third, that in consequence he was able to save the substantial sums which he earned from the deals he carried out when selling different items and from grooming horses; fourth, that this income was in cash; and fifth, that he did not use banks because he distrusted them with the consequence that he would have kept his earnings in cash at his home until it was taken to the Nationwide after his death in the circumstances which I have described.

So I find that the source of the money in the Nationwide account was money that had been earned and retained in his home by Mr Hackett senior. It is true that there are no accounts or tax returns, but that is not surprising for somebody who is a rag and bone man.

It follows therefore that the first basis upon which the claim of the claimant could be dismissed has to be rejected for two reasons, namely first there is no evidence that the money in the Nationwide account was derived from the second defendant’s criminal activities as the second defendant’s criminal activities only started after the money had been deposited in the Nationwide and significantly the enquiries of the CPS do not suggest otherwise. The second and alternative reason is that there is clear evidence that the money was derived from the trading activities of the claimant’s husband and which I have described. It now becomes necessary to consider in turn the substantive claims of presumed undue influence and non est factum.

Introduction

The doctrine of presumed undue influence applies where a claimant is able to point to a relationship of influence with a defendant and that a transaction arises, which calls for an explanation. In Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773, Lord Nichols of Birkenhead explained in his speech that:-

“13.

Whether a transaction was brought about by the exercise of undue influence is a question of fact. Here, as elsewhere, the general principle is that he who asserts a wrong has been committed must prove it. The burden of proving an allegation of undue influence rests upon the person who claims to have been wronged. This is the general rule. The evidence required to discharge the burden of proof depends on the nature of the alleged undue influence, the personality of the parties, their relationship, the extent to which the transaction cannot readily be accounted for by the ordinary motives of ordinary persons in that relationship, and all the circumstances of the case.

14.

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”.

The words “in the absence of satisfactory explanation” in paragraph 14 of Lord Nicholls’s speech, which I have just quoted, were considered further by Lloyd LJ in Smith v Cooper [2010] EWCA Civ 722, when he explained in relation to those words of Lord Nicholls that: -

“60.

It is plain from his speech that he was using the phrase "a transaction which calls for explanation" as shorthand for the formula in Allcard v Skinner.”

That “formula” was, the transaction must be one which is "not to be reasonably accounted for on the grounds of friendship, relationship, charity or other ordinary motives on which ordinary men act”.

In those circumstances, there is no dispute between the parties that the issue of presumed undue influence in this case has to be resolved by answering in turn the following questions which are: -

Was there a relationship of presumed influence between the claimant and the second defendant such that a potential claim of presumed undue influence arises?

Not surprisingly and quite correctly, Mr Fletcher accepts, as I would have inevitably found to be the position, that there was such a relationship because in June 2003, the claimant signed a Power of Attorney in favour of her son, namely the second defendant and this meant that there was a relationship of presumed influence between the claimant and the second defendant. There are further reasons why there was a relationship of presumed influence between the claimant and the second defendant such that a potential claim of presumed undue influence arises and this requirement is satisfied because first the claimant was deaf, dumb, barely educated and illiterate and second, since the death of her husband, she had become reliant on the second defendant to manage her affairs and to physically care for her. There was clear evidence from, for example, the claimant’s sister Mrs Savage that the claimant went “downhill” after her husband’s death in 1997 so that in consequence she was reliant on the second defendant to deal with these matters on her behalf.

Is there a transaction arising out of the relationship between the claimant and the second defendant that calls for evidence of the free exercise of the will of the claimant as a result of full, free and informed thought?

The CPS contends that the transfer of the house by the claimant could be reasonably accounted for and was not suspicious when put into context, which was that the second defendant had explained that there was a risk of inheritance tax being payable on the estate of his mother, the claimant, if the house remained in her name. Mr. Fletcher contends that this was a significant factor because at the time of the transfer of the house, the claimant was old and depressed.

I am unable to accept that submission because the transfer of the house from the claimant to the second defendant was a transaction which very clearly called for an explanation bearing in mind the following factors.

First, this was a substantial transaction in which the savings of the claimant’s husband had been invested. It must not be forgotten that there was clear evidence, as I have explained in paragraphs 42 and 43 above, that the claimant’s husband had let it be known that the money, which was used for the house, was intended for the benefit of the claimant. No evidence has been adduced that the claimant had any other assets, but it was clear that she lived in a rented flat for which she paid a low rent. It is noteworthy that the letter sent to the claimant by Mr. Stevens dated 6 October 2004 refers to the house as being “your sole major asset”. This information must have been communicated to him and I have no reason not to regard it as accurate.

Second, there was a further detriment caused by the transfer which was that after the house had been transferred to the second defendant, the claimant would thereafter no longer be entitled to the rent from the house which had at all material times been let.

Third, even if inheritance tax planning was the main reason or justification for the transfer of the house by the claimant to the second defendant, the fact that it was given solely to the second defendant requires some explanation bearing in mind that he had two other brothers, Peter and Michael Hackett. Even though these two sons of the claimant had shown no interest in their mother, the transaction, which precludes them from enjoying any part of the benefit of a major asset of their mother, does require an explanation. This point is fortified by the fact that the second defendant was obtaining the sole right to the benefit of the rents paid by the occupants of the house.

Fourth, in my opinion, any transaction by which the donee of a Power of Attorney obtains a gift of a substantial asset from the donor of the Power of Attorney calls for some form of justification, especially if, as in this case, the donor is old, infirm, deaf and dumb and the donee himself organises the transaction.

Can the CPS (as the party seeking to counter the inference of undue influence)discharge the evidential burden and provide a satisfactory explanation for the transfer so that the presumption in favour of undue influence can be rebutted?

It is not in dispute that at this stage the burden of proof shifts from the person who has been subjected to the presumed undue influence to the person who is the party seeking to counter the inference of undue influence, namely CPS. Lloyd LJ explained in Smith v Cooper [2010] EWCA Civ 722, in relation to the presumption of undue influence: -

“61.

If that is shown, as Lord Nicholls said, the presumption of undue influence applies, that is to say, the court will presume that the transaction was procured by undue influence exercised by one party over the other, in other words by the abuse by the one of the position of influence that he has over the other. In such a case it is then up to the one party to prove that the transaction was not procured by an abuse of his position of influence but was rather the free exercise of the will of the other party as a result of full, free and informed thought. Lord Nicholls' phrase "in the absence of satisfactory explanation" in paragraph 14 of Etridge refers to the dominant party satisfying this burden of showing that the transaction was not procured by undue influence. Full understanding of the transaction is of course necessary but by no means sufficient, because the problem is lack of independence, not lack of understanding. As was said by Buxton LJ in Turkey v. Awadh[2005] EWCA Civ 382 at paragraph 15:

‘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’".

Later in his judgment Lloyd LJ stated that in the appeal with which he was concerned, the judge at first instance had: -

“65… approached the case on the basis that it would be sufficient for Mr Smith to show that there was a reasonable explanation for the transaction or that it was not manifestly to Miss Cooper's disadvantage….

66.

It seems to me that the judge asked himself the wrong question at this stage of the analysis. He did not consider whether Mr Smith had discharged the burden of proving that Miss Cooper entered into the transaction of her own free will, independently of, and not in any way as a result of, the influence that Mr Smith was in a position to exercise over her”.

Turning to the facts of the present case, the CPS has, adopting Lloyd LJ’s words, the burden of proving that the claimant transferred the house to the second defendant “[of] her own free will, independently of, and not in any way as a result of, the influence that [the second defendant] was in a position to exercise over her”. Mr Fletcher seeks to derive assistance from the fact that the claimant’s own evidence is that “David would not cheat you, would he? No, No he is good he is a good man”. It is also said that Mrs Savage said that “after Laurence’s death David was the person looking after [the claimant]”. The second defendant said exactly the same thing and it is suggested that those comments are inconsistent with the contention made by the claimant.

I am unable to agree that these statements assist Mr. Fletcher’s case for at least three reasons. First, it is not determinative of the issue that the person presumed to exert undue influence did not act wrongfully as it is not an ingredient of undue influence that the wrongdoer cheated the victim because, as was explained by Mummery LJ in Niersmans v Pesticcio [2004] EWCA Civ 372:-

“20…Although undue influence is sometimes described as an ‘equitable wrong’ or even as a species of equitable fraud, the basis of the court's intervention is not the commission of a dishonest or wrongful act by the defendant, but that, as a matter of public policy, the presumed influence arising from the relationship of trust and confidence should not operate to the disadvantage of the victim, if the transaction is not satisfactorily explained by ordinary motives: Allcard v. Skinner (1887) 36 Ch D 145 at 171. The court scrutinises the circumstances in which the transaction, under which benefits were conferred on the recipient, took place and the nature of the continuing relationship between the parties, rather than any specific act or conduct on the part of the recipient. The court may set a transaction aside, even though the actions and conduct of the person who benefits from it could not be criticised as wrongful.”

Second, the fact that the claimant relied on the second defendant is not an answer to a claim for presumed undue influence, but indeed on the contrary in this case, that factor goes some way to constituting an ingredient of it. The issue is whether the CPS can show that the claimant was emancipated from the influence of the second defendant in the way Lloyd LJ indicated.

Third, none of the comments made by Mrs Savage or by the claimant on this point are of any relevance to the question of whether the transfer of the house from the claimant to the second defendant was “as a result of full, free and informed thought” by the claimant particularly in the light of the facts first that there was evidence from, for example, Mrs. Savage that the claimant went downhill after her husband died; second that she then did not have any interest in anything; and third she then became reliant on the second defendant. This question of whether the claimant was emancipated from the second defendant’s influence when she transferred the house to him requires a careful objective analysis of the evidence and, in particular, the nature of any advice given to her.

The next point that is made by Mr Fletcher is that the claimant did exercise “full, free and informed thought” before transferring the house to the second defendant. In support, he says that there is no direct medical evidence relating to the claimant’s capacity for such thought in 2004, while the evidence of the three members of the Savage family is incomplete as they were not living with the claimant and that they only saw her irregularly socially. Furthermore, he contends that their comments about the claimant’s mental condition did not relate to the precise time of the transfer of the house to the claimant and that in any event, they are too general to be of any value. Mr. Fletcher points out that the claimant was able to execute a Power of Attorney in favour of the second defendant but this is not a good point as it has not been necessary on this application to determine whether the Power of Attorney can be impugned because of presumed undue influence, or of non est factum or of any other factor.

Then, it is said by Mr. Fletcher that although the claimant may have had severe communication problems, it is does not follow that she was unable to make up her own mind about matters and indeed she was able to do so because she firstly chose the house as the one she wished to buy and live in and second she later decided that she did not wish to live there.

I do not consider these points to be of much, if indeed any, relevance because the answer to this depends on an analysis of the claimant’s dealings with Mr Stevens bearing in mind that the critical question on this issue is not whether the CPS can show that there was a reasonable explanation for the transfer or that it was not manifestly to the claimant’s disadvantage. The task for me is to answer the totally different question of whether the claimant entered into the transaction of giving the house to the second defendant as a result of “full, free and informed thought”, as was explained by Lloyd LJ at paragraph 61 of Smith v Cooper in the passage, which I have set out in paragraph 61 above.

This means that to show that there was no undue influence, the CPS must go further than showing some reasonable explanation for the 12 October 2004 transfer of the house by the claimant to the second defendant, because it must satisfy the burden of showing that the claimant entered into the transaction of giving the house to the second defendant as a result of “full, free and informed thought” independent of any influence that the second defendant was in a position to exercise over her. In other words, the issue to be determined is whether the CPS can show that the claimant was emancipated to the extent that she acted independently of the influence that her son was in a position to exercise over her and not the influence that he did actually exercise over her.

Mr Staunton reminds me that in considering whether the decision of the claimant satisfies this requirement, the fact that the claimant received legal advice is an important factor but that it is not necessarily a decisive factor. Lord Nicholls said in the Etridge case that:-

“20… Proof that the complainant received advice from a third party before entering into the impugned transaction is one of the matters a court takes into account when weighing all the evidence. The weight, or importance, to be attached to such advice depends on all the circumstances. In the normal course, advice from a solicitor or other outside adviser can be expected to bring home to a complainant a proper understanding of what he or she is about to do. But a person may understand fully the implications of a proposed transaction, for instance, a substantial gift, and yet still be acting under the undue influence of another. Proof of outside advice does not, of itself, necessarily show that the subsequent completion of the transaction was free from the exercise of undue influence. Whether it will be proper to infer that outside advice had an emancipating effect, so that the transaction was not brought about by the exercise of undue influence, is a question of fact to be decided having regard to all the evidence in the case.”

So it is necessary for me to make a fact-sensitive decision and it was explained by Judge Hegarty QC sitting as a Deputy High Court Judge in Wright v Hodgkinson [2004] EWHC 3091 Ch [125] that: -

“..of course, the mere fact that legal advice is obtained cannot suffice, unless it is proper to infer that it must have led to a decision based upon full, free and informed thought”.

To my mind, the relevant principles to be applied in determining this issue are those explained by Mr Staunton, which are that:-

In my view, in cases where a donor is suffering from a mental impairment or a learning difficulty, the court is obliged to look with special care to see if the decision taken by a donor is really based on full, free and informed thought. Snell on Equity (32^nd Edition page 272) quotes the case of Williams v Williams [2003] WTLR 1371, where the presumption was not rebutted in the case of a claimant suffering from severe mental impairment and who was dependent on the defendant even though it was accepted that the claimant had been “independently advised and that advice would have brought to an ordinary person the implications of what he was doing”. The claimant in the present case was not suffering from a medical impairment but she was deaf, dumb and barely educated and this required especially careful advice before the CPS would have discharged the burden of showing that the claimant disposed of the house as a result of full, free and informed thought.

This entails considering Mr. Steven’s role and in particular examining what he knew of the claimant’s financial position, what advice he gave to the claimant and whether when she transferred the house to the second defendant, this action was as a result of “full, free and informed thought”. Mr. Fletcher complains that the claimant did not call Mr. Stevens as a witness, but this submission fails to appreciate that the burden of proof on this issue is on CPS as the party seeking to counter the inference of undue influence, who could have asked the claimant to waive privilege (if she had not already done so by producing Mr. Stevens’ attendance note for use in these proceedings) and then could have called Mr. Stevens. It has not been suggested by Mr. Fletcher that Mr. Stevens has refused to attend when requested to do so by the CPS. I have not had the benefit of hearing him give evidence or of reading a witness statement from him, but I have seen an attendance note written by him, which has been admitted in evidence. It is the only contemporaneous record of the contact between him and the claimant relating to the transfer of the house.

The attendance note states (with my emphasis added) that: -

“ATTENDANCE NOTE

Re: Mrs Violet Hackett and Mrs Copsley, who are both deaf, and Mr Hackett

4 October 2004

Would have preferred to see client without Mr Hackett present, but unfortunately was very very difficult as both her and Mrs Copsley are profoundly deaf and they would, it would appear, only speak via Mr Hackett properly. I explained whilst directing my comments to Mrs Copsley and Mrs Hackett, and they discussed matters between them, but again being profoundly deaf it was very difficult to make out what they were saying. Mr Hackett translated for me, and when he translated back the replies he did not twist the words nor make them different to those which I had used. I believe it is probably of her own free will however I am not entirely satisfied that she is fully capable of making this decision even though she was aware and did listen to me and did nod at the appropriate moments when I explained the situation.

1.

Explained loss of asset. By transferring loses asset, loses control, and loses the possibility of raising future capital by home equity release.

2.

Mentioned IHT liability, definition 7 years and the tapering of this.

3.

Mentioned care costs, and explained the policy of local authority’s care costs and the like and explained that bottom line of it was if local authority felt that transfer was done to put beyond care, they could take action. Mr Hackett confirms that he is the sole carer of Mrs Hackett, no other party, so I would imagine that this is not a major cause for concern. He is not worried nor is she worried, but obviously I made it clear that there is this possibility.

Queried over mental capacity and sensed that she understood, but as going to put everything in writing cannot really do much more.

4.

Queried over duress. Did not seem to be any duress, and she seemed perfectly happy, Mrs Copsley also seemed perfectly happy. Slight concern when impression given that Mrs Hackett was not too happy, but thinks this was more to do with circumstances and her being here than the transfer. At no point did she query the transfer, make any comment, nor look to Mr Hackett before answering my questions.

Said we would draw up documentation, send, in light of fact client wishes for it as soon as possible, and wishes to complete by Saturday as client goes away on Saturday.

DS”

The evidence of the second defendant was that the way in which the meeting with Mr. Stephens was organised was that the meeting took place when he, the claimant and Miss Copsey were going out for a pub lunch and that they dropped in to see Mr. Stevens. He said that his mother wanted to get out of the meeting with Mr. Stevens speedily in order to have a cigarette and then to have her pub lunch while Miss Copsey regarded what was being discussed with the solicitor as being none of her business. I accept this account, which shows that the claimant was paying limited attention to what Mr. Stevens was saying, and that the second defendant was then communicating to her.

The second defendant explained that he cannot recall receiving the letter of 6 October 2004 from Mr. Stevens addressed to his mother enclosing the transfer and which he would have opened. His evidence was that he cannot recall how it came to be signed and in his witness statement, he said that he put the transfer in front of his mother and she signed it before returning it to the solicitors. The second defendant’s witness statement stated that “I did not explain the terms of the letter or the document to my mother”. I accept this evidence (which is set out in more detail in paragraph 88 below) and I conclude that the claimant was not informed of the advice in the letter and, of course, she could not read it, as she was unable to read, according to Mrs. Savage. The witness statement of the claimant does not deal with her meeting with Mr. Stevens or with the letter of 6 October 2004 or indeed with any matter relating to how the house came to be transferred to the second defendant by the claimant. The letter of 6 October 2004 did nothing to enable the claimant to make the decision to transfer the house based on full, free and informed thought.

The second defendant stressed that the purpose of the gift of the house to him was to reduce the claimant’s liability for IHT.

In the absence of Mr Daniel Stevens, I have had to judge his role in the light of the attendance note and the letter without hearing his explanations and so any criticisms I am compelled to make of him must be seen in that light. I have come to the conclusion that the advice that was given by Mr Daniel Stevens was inadequate to establish that the claimant was emancipated from the second defendant’s influence and that her decision was based on full, free and informed thought. The factors which I set out in no particular order of importance and which have individually and cumulatively led me to this conclusion are that: -

In all those circumstances and on the evidence available (which of course did not include any evidence from Mr. Stevens) it is clear that the claimant was not properly emancipated, as she did not make the decision to transfer the property to the second defendant based upon “full, free and informed thought”

In reaching that conclusion, I have taken into account the fact that Miss Copsey was in attendance, but it must not be forgotten that the burden was on the CPS to establish by calling Miss Copsey or any other witness that the claimant acted of her own free will. The fact that she has not been called does not assist the CPS in any way.

In my view and contrary to Mr. Fletcher’s submission, the statement by Mr Stevens in his attendance note that the transfer “was probably of her own free will” does not assist the CPS’s case. First, this would appear to be addressed to a claim of duress and not to the issue of whether the claimant made the decision to transfer the property to the second defendant based upon “full, free and informed thought”. Second, because there is nothing to suggest that Mr Stevens was familiar with the full facts and so he could not advise the claimant for the reasons set out in paragraph 80 above. Third, there is also nothing to suggest that the decision to sign the transfer was a matter of which Mr Stevens would have any knowledge, as he was not present when this was done. Fourth, not merely did Mr. Stevens not see the claimant at any time by herself, but he only saw her in the presence of the second defendant, who was the person who was the beneficiary of the presumed undue influence. Finally, although Mr. Stevens “queried over mental capacity and sensed that she understood”, there is no information explaining why he came to that conclusion. The stark fact is that the onus was on the CPS to discharge the onus on them on this issue and they could have tried to call Mr Stevens but apparently they did not do so as there is no evidence that he was asked to make a witness statement or to attend or that he received a witness summons or that he is ill.

At the end of the day, I am quite satisfied that the claimant did not make the decision to transfer the property to the second defendant based upon “full, free and informed thought” and for that reason the claim based on presumed undue influence succeeds. I should add that if the onus of proof on all issues had been on the claimant, I would have reached the same conclusion.

As the transfer of the house to the claimant by the second defendant has to be set aside because of presumed undue influence, this claim based on non est factum is academic, and so I will deal with it more briefly than I would have done if it had been the decisive issue.

A successful plea of non est factum enables a party to avoid an agreement if that party was permanently or temporarily unable, through no fault of its own, to have any real understanding of the purport of the document, irrespective of whether this inability arises from defective education or any incapacity (see Saunders v Anglia Building Society [1971] AC 1004, 1015-1016).

For obvious reasons, the courts are very reluctant to allow people to avoid transactions under this head and as Lord Wilberforce explained in the Saunders case at page 1027E-F:-

“As to persons who are illiterate, or blind, or lacking in understanding, the law is in a dilemma. On the one hand, the law is traditionally, and rightly, ready to relieve them against hardship and imposition. On the other hand, regard has to be paid to the position of innocent third parties who cannot be expected, and often would have no means, to know the condition or status of the signer. I do not think that a defined solution can be provided for all cases. The law ought, in my opinion, to give relief if satisfied that consent was truly lacking but will require of signers even in this class that they act responsibly and carefully according to their circumstances in putting their signature to legal documents.”

In her witness statement, the claimant does not give any evidence as to how she came to sign the transfer. The second defendant stated in his witness statement that when the letter from Mr Stevens of Duffield Harrison of 6 October 2006 arrived he opened it as he opens all the correspondence addressed to the claimant. He then says that:-

“I then simply put the document in front of her sign and returned it to the solicitor. That was a transfer of the cottage from my mother’s name into my name I did not explain the terms of the letter or the document to my mother. There was no money paid for the transfer”.

When he was giving his evidence, the second defendant confirmed that he could not recall the deeds being signed and that he could not recall the role of Miss Copsey and I accept all this evidence of the second defendant. When a claim for non est factum is put forward then:-

“There must be a heavy burden of proof on the person who seeks to invoke this remedy. He must prove all the circumstances necessary to justify it is being granted to him, and that necessarily involves his proving that he took all reasonable precautions in the circumstances” (per Lord Reid in the Saunders case at page 1016).

In this case there is no evidence as to what the claimant thought she was signing. She might well have realised that she was transferring the house to the second defendant. In other words, she has failed to discharge the burden on her and for that reason, this claim must fail.

In my view, the claim for presumed undue influence succeeds while that for non est factum fails.