Brown v Stephenson

Introduction

This case concerns three pieces of land –

A piece of land now registered under title ND94369 containing the barn known as Capri Lodge, Northgate farm, Morpeth Northumberland NE61 3 BX. This land has been referred to as “Capri Lodge”.

A 3 acre paddock adjoining Capri Lodge. This land was formerly also part of ND94369 but is now separately registered under title number ND141692. It is referred to as “the Paddock”.

A piece of woodland registered under title ND98390 extending to approximately 7 acres to the north and (in part) to the east of Capri Lodge. This land is referred to as “the Woodland”

In April 2000 Mrs Brown, the Claimant, was the owner of all three pieces of land. She acquired Capri Lodge and the Paddock in 1995 and the Woodland in April 2000.

In August 2001 Mrs Brown and Mr Stephenson, the Defendant, entered into a partnership. The terms of the partnership are contained in a number of documents to which it will be necessary to refer later in this judgment.

On 30 July 2003 Mrs Brown executed a Declaration of Trust in which she declared that she held the three pieces of land on trust for herself and Mr Stephenson as legal and beneficial joint tenants. On the same day she signed a TR1 Form transferring the three pieces into joint names.

On 3^rd May 2005 Mrs Brown and Mr Stephenson executed a TR1 and a TP1 Form in which they transferred the Paddock and the Woodland into the sole name of Mr Stephenson.

There is a conflict of evidence as to the circumstances in which the Declaration of Trust, the two TR1s and the TP1 were executed. However Mrs Brown contends that they were each executed as a result of the undue influence of Mr Stephenson. She relies on the fact that she is dyslexic, suffered medical problems and was under financial pressure. She alleges that Mr Stephenson was aware of her problems and also alleges “aggressive and bullying behaviour”. She accordingly seeks to have each of the transactions set aside.

Mr Stephenson denies that the execution of any of the documents was procured by undue influence. He denies that the allegations of bullying and asserts that Mrs Brown’s signature was freely given and independently witnessed. He asserts that he gave consideration for the Declaration of Trust. He relies on the fact that Mrs Brown did in fact receive independent advice from a solicitor – Mr Wholley – before she executed the 2005 TR1 and TP1.

There is a further dispute over the partnership. Mr Stephenson contends that the partnership came to an end on 21^st January 2005 when Mrs Brown served on him a professionally drawn Notice of Retirement. Mrs Brown asserts that the Notice of Retirement was signed because of “extreme pressure” placed on her by Mr Stephenson. She invites the Court to order a dissolution of the partnership.

On 2 February 2009 Mrs Brown and Mr Stephenson signed a contract under which they agreed that Capri Lodge would be equally divided between the joint owners and registered under separate Title Numbers. The contract provided for a completion date of 23^rd March 2009 but did not particularise how the partition was to take place. In the Counterclaim Mr Stephenson seeks specific performance of the contract. In her defence Mrs Brown relies on a number of matters. She points to the fact that there was no agreement as to the division of the land and she relies on the undue influence pleaded in the Particulars of Claim. In the light of the cross-examination of Mr Stephenson by Mr Mundy Mr Goldberg accepted that the claim for specific performance could not succeed. In those circumstances I shall deal with this issue relatively briefly.

During the course of the hearing I indicated that in order to avoid further costs I might be prepared to consider the question of whether to make an order for partition of the property even though it was not pleaded. For reasons which I shall set out briefly below I do not think it appropriate to consider partition.

The facts

Mrs Brown was born on 30^th August 1928. She is accordingly now nearly 85 years old. She was, for many years a nurse. Her husband died in 1992. She had an interest in animals and for 20 years rented a stables in which she reared goats.

According to a business plan which was prepared in early 2002 for the purpose of funding under the Rural Enterprise Scheme:

Mr Stephenson has a background in engineering, house building and house maintenance. He worked on various power stations and then left to join Swan Hunter Ship Building until 1998 when the yard closed. Thereafter he enrolled on a brick laying course. Thereafter he did building and house maintenance work including plumbing, double glazing and guttering. He now works as a carer for disabled patients. He has an interest in sheep farming on a small scale.

On 11^th December 1995 Mrs Brown purchased Capri Lodge and the Paddock for £26,500. On 11^th April 2000 she bought the Woodland for a further £4,000. The total area of the holding is approximately 11 acres. Mrs Brown paid for the land out of her savings. When she moved in the barn had stables inside it and had been used as a farm shop.

In cross-examination Mrs Brown said that she moved onto the land in October 1995 whilst the sale was proceeding. She lived in a caravan on the land. She bought a portacabin which she used as an office. She successfully negotiated the installation of water electricity and other services to the portacabin.

She ran a business from the land which was initially called “Dairy Goat Produce”. Initially she had 16 goats and sold goat’s milk, cheese, yoghurt and occasionally goat meat.

She accepted in cross-examination that she was responsible for the financial side of the business. She had a bank account with Barclays Bank, negotiated a loan of £12,000. She kept the books and records. She was registered for VAT and prepared the VAT returns.

According to Mr Stephenson the parties met in 1990 when he bought a dog from Mrs Brown. At that time the parties lived about 300 yards apart in Gosforth.

About 4 years after Mrs Brown moved to Capri Lodge Mr Stephenson visited her there. According to Mrs Brown he was looking for a home for the dog. It is, in any event, not in dispute that Mr Stephenson helped Mrs Brown after that. He carried out some work to the barn and attended farmers’ markets with her. There is a dispute (which I do not need to resolve) as to the extent to which Mrs Brown paid for the work.

In February 2001 Mrs Brown had some financial problems. She was 70 and living in a caravan and it was suggested to her that she look for a partner. There is a conflict of evidence as to the circumstances in which the partnership was agreed and its terms.

Mr Stephenson suggests that Mrs Brown had advertised for a working partner in the local newspaper. When no suitable person was found she asked him if he was interested in going into partnership with her to develop Capri Lodge. Mr Stephenson was interested. He could use his skill and experience to obtain planning permission and carry out development works to the barn.

The agreement was that the property would be valued by a local valuer and that Mr Stephenson’s contribution would be to carry out the development works to the value of half of the valuation.

Mrs Brown accepts that there was a partnership agreement. She, however, contends that Mr Stephenson asked her if he could be her partner. Nothing turns on this difference in recollection.

She contends that it was agreed that Mr Stephenson would convert the barn into a 4 bedroomed house in consideration of his being a 50% owner of the house. In evidence she made it clear that Mr Stephenson was only to become an owner when the work was complete.

It is not in dispute that on 10^th August 2001 the local valuer – George White – valued the small holding at £45,000.

In December 2001 Mrs Brown and Mr Stephenson visited Mr Fenny, a solicitor practising in Cramlington, Northumberland. Following the meeting Mr Fenny wrote to them at Mr Stephenson’s address in Newcastle. In the letter he set out various proposals which he had made at the meeting. The proposals included a suggestion that the smallholding be transferred into joint names, that the smallholding be run as an equal partnership with provision for retirement and buying out of the other partner’s share. Mrs Brown has little recollection of the meeting with Mr Fenny though she accepted that she had visited him on one occasion.

On 20^th January 2002 the parties executed the first partnership agreement. This is a short document extending to less than half a page. It is signed by Mrs Brown and Mr Stephenson. Their signatures are witnessed by Mrs Ridley and Mr McGowan. Mr Stephenson suggested that it was typed by Mrs Brown. Mrs Brown could not remember typing it. However it contains a number of spelling mistakes.

It contains two effective terms. First it records that the parties agreed to become partners of the property known as Capri Lodge from 10^th August 2001. Thereafter they are responsible for the business known as Capri Lodge Products as equal partners. Second it provides that on the death or retirement of one of the partners the other to have the option to buy out or lease the other half of the business/property at a value not to exceed the original valuation of the property.

Although not directly relevant to the issues in the case it is necessary to bear in mind that there was a boundary dispute between Mrs Brown and Mr Stephenson as owner of Capri Lodge and the Paddock and Mr and Mrs Hawes as owners of Northgate Farm to the South and East. Before 1995 all of the land was in the common ownership of Mr and Mrs Shanks. At the time Mr and Mrs Hawes were the tenants of Northgate Farm. There was a conveyancing error when Capri Lodge was conveyed to Mrs Brown in 1995. As a result of that error part of the barn was not conveyed to her and ended up within the title of Mr and Mrs Hawes.

The problem had come to light in early 2002 when Mr Stephenson visited the Land Registry to inspect the title. There were proceedings in the Morpeth County Court. In October 2002 Mrs Brown instructed Mr Wholley, a partner in the firm of Wholley Goodings who practice from Morpeth to act on her behalf in the dispute.

Those proceedings were ultimately compromised following a mediation in November 2005. It was a term of the compromise that Mrs Brown and Mr Stephenson paid Mr and Mrs Hawes paid Mr and Mrs Hawes £6,000 over a period of 6 months. Those sums were in fact paid by Mr Stephenson. On 12 June 2006 the parties entered into a Deed of Rectification by which Mr and Mrs Hawes transferred the disputed area of land to Mrs Brown and Mr Stephenson.

On 26^th June 2002 the parties signed an Amendment to the 20^th January 2002 Agreement. Their signatures were witnessed. The Amendment is relatively short – it contains only 6 paragraphs. In paragraph 2 it provides that on 10^th August 2001 Mrs Brown and Mr Stephenson agreed to become partners in the property known as Capri Lodge following a valuation on that date. In paragraph 3 it provides for an equal partnership of Capri Lodge Products. Under paragraph 4 there is an option which enables one of the partners to purchase the other partner’ share at the original valuation figure in the event of death or retirement. The purchase price is payable over 10 years without interest. The valuation figure is then reduced by 22% as a result of the boundary dispute. In the event of settlement of the boundary dispute this reduction no longer applies.

It is not clear who prepared this document. Mr Stephenson suggested it was Mrs Brown. Mrs Brown did not think that she had. Certainly it does not contain any spelling mistakes. In any event she agreed that there was no pressure on her to sign the agreement. She said that the idea was that she and Mr Stephenson would be partners in the property but that Mr Stephenson would not get an interest until he had completed the work.

Shortly after the execution of the 26^th June 2002 agreement the parties visited Mr Fenny. On 19^th August 2002 Mr Fenny wrote to Mrs Brown and Mr Stephenson at Mr Stephenson’s address. In that letter he enclosed a draft TR1 transferring the land (that is to say Capri Lodge, the Paddock and the Woodland) into the joint names of the parties.

The TR1 contained a declaration that the property was to be held by themselves as tenants in common in equal shares. The letter invites the return of the TR1 when executed so that Mr Fenny could proceed with the registration. It also referred to Mr Fenny sending a Partnership Agreement within the next few days.

The TR1 was signed by Mr Stephenson and Mrs Brown and was returned to Mr Fenny by 4^th September 2002. It would appear that Mr Fenny overlooked his obligation to register and it was never registered. Equally he never prepared a Partnership Agreement.

Mrs Brown had little (if any) recollection of the meeting. There is an inference that the meeting took place and that Mr Fenny was instructed to draft a Partnership Agreement. Mrs Brown also had no recollection of signing the TR1. In proceedings before the Land Registry she had asserted that her signature was forged. She did not pursue that allegation in these proceedings. She did however say that Mr Affleck, who purported to witness her signature, had not done so.

She did not suggest that the TR1 was signed as a result of any improper pressure by Mr Stephenson. She said that at this time she was getting on well with Mr Stephenson.

On 15^th April 2003 Mrs Brown and Mr Stephenson attended the office of Wholley Goodings and instructed Mr Wholley to draw up a partnership agreement. According to the attendance note they informed him that they had been in partnership since August 2001 and were sharing profits equally. Mr Wholley sent out a draft agreement on the same day.

On 28^th April 2003 Mr Wholley attended Mr Stephenson with some proposed amendments to the agreement. The amendments related to the right of the surviving partner to buy out the other and a right of occupation on retirement.

On 16^th May 2003 Mr Wholley wrote a letter to Mrs Brown and Mr Stephenson. He enclosed a redraft of the agreement. In the letter he drew their attention to a number of “fundamental” matters that needed to be considered. These included the rights of occupation at Capri Lodge, the right to buy out and whether the property (Capri Lodge) was to be a partnership asset.

On 21^st May 2003 Mr Wholley saw Mrs Brown and Mr Stephenson. According to his file note:

On 3^rd July 2003 Mr Wholley wrote to Mrs Brown and Mr Stephenson enclosing a TR1 transferring the property into joint names, the Declaration of Trust and the Deed of Partnership. He explained that he had received express instructions for the retiring partner to continue to reside at the premises and receive no payment for their share.

The Declaration of Trust contains two recitals and three clauses. In recital 2 it records that Mrs Brown is desirous of entering a partnership arrangement with Mr Stephenson. In clause 1 it records the consideration as being the “partnership arrangement” and declares that Mrs Brown holds Capri Lodge, the Paddock and the Woodland on trust for herself and Mr Stephenson as joint tenants in law and equity. It contains the provision entitling a party to reside at the property notwithstanding any dissolution of the partnership.

The TR1 is in standard form save that it provides for the properties to be held as legal and beneficial joint tenants.

It is not now in dispute that the TR1 and the Declaration of Trust were signed by the parties on about 6^th July 2003. In each case Mrs Brown’s signature is witnessed by Mr Affleck. By 10^th July 2003 the documents had been returned to Mr Wholley who duly registered the TR1 at the Land Registry. The documents are dated 30^th July 2003. Mr Wholley, who gave evidence on the last day at the trial, explained that it was Wholley Goodings policy not to submit documents for registration until its fees were paid. When that happened they would date the Deed and submit it for registration.

In proceedings before the Land Registry Mrs Brown asserted that her signature had been forged. This allegation was not pursued. When she gave evidence she had very little recollection of the relevant events. She could not remember signing either document. She was, however, convinced that Mr Affleck had never witnessed her signature.

She had little (if any) recollection of the meeting with Mr Wholley on 21^st May 2003. She did not think she had given the instructions for the property to be placed in joint names. She thought Mr Stephenson would become a partner when the job was completed. It was not half done by May 2003. She was referred to a Diary Entry that she made for the 21^st May 2003 which referred specifically to the visit to the solicitors and the Deed of Trust. She accepted the visit must have taken place.

She accepted that at this time relations between herself and Mr Stephenson were good – “We were getting on quite well”. She accepted that he put no pressure on her to sign the documents. She also accepted that she was still in charge of the financial side of the business. Thus she was maintaining the books and records and was not dependent on Mr Stephenson for financial advice.

The Partnership Agreement prepared by Mr Wholley was not executed by the parties in July. Accordingly on 5^th November 2003 Mr Wholley sent Mrs Brown and Mr Stephenson a further copy. On 25^th November 2003 the Partnership Deed was signed by the parties. It is not necessary to comment on it in detail but a number of points need to be noted:

It is a partnership relating to Capri Lodge Products only. Thus it does not purport to deal with the trusts relating to Capri Lodge itself. Indeed clauses 3 and 5(b) make it clear that the property is not a partnership asset.

It contains a number of what might be regarded as usual terms relating to bankers, equal division of profits and losses, books of account and the like.

It provides for determination of the partnership on 3 months notice. It also provides that any partner may retire by giving 6 months notice to the other. It may be thought that there is some inconsistency between these two clauses but nothing turns on it.

The precise amount of work carried out and the moneys spent by Mr Stephenson are not clear. Equally the precise dates on which work was carried out are not clear. However there is some common ground between the parties:

Shortly after the original agreement was made in August 2001 Mr Stephenson paid Mrs Brown £2,500.

Mr Stephenson paid for an architect and structural engineer to draw up plans for the conversion of the barn into a dwelling. He also paid for the application for planning permission. Building regulation consent was obtained on 25^th January 2002. Planning permission was granted on 8^th March 2002. The permission was subject to two occupation conditions. The occupier had to be employed in agriculture and limited to persons engaged in the day to day management of the dairy business at Capri Lodge. On 13^th June 2011 the conditions were relaxed but not removed altogether. The current position is that the occupation is limited to persons solely or mainly employed in the agricultural business at Capri Lodge.

Although the works are still not complete they were sufficiently complete to enable Mr Stephenson to move in on an informal part time basis in 2004 when he sold his house.

Mrs Brown and Mr Stephenson moved in to their respective parts of the house in 2008. Mrs Brown moved into Capri Lodge South; Mr Stephenson moved in to Capri Lodge North. At ground floor level the two halves are now separate. There is a helpful plan prepared in March 2009 showing the current division of the house. They each have a bathroom, bedroom and kitchen/living area. It is not in dispute that this is substantially complete. The roof space is relatively undeveloped though Mr Stephenson has put in a level floor, has restructured the beams and put in 2 velux windows in Mrs Brown’s half. In his half he has put in a hot water cylinder and a chimney for his solid fuel fire. As from 2008 the two halves have been separately assessed for Council tax purposes.

In its current state and subject to joint occupation Capri Lodge has been valued at £160,000. This does not take into account the planning restriction.

Part of the works have been funded by the DEFRA grant of £9,731 though Mr Stephenson made the point that he matched the moneys put in by DEFRA. The DEFRA grant had to be spent on the dairy which now forms Mr Stephenson’s kitchen.

Mr Stephenson has prepared a document setting out all his expenses in relation to both partnerships. A significant number of the entries do not relate to the building work for the barn but relate to expenses in relation to the land. Thus there are entries for agricultural trailers, mowers, fence posts, harrows and the like. To my mind these would be relevant in the taking of the account in the partnership. These items total £18,606.

On pages 3 to 5 of the document (323 – 325) Mr Stephenson sets out his costs in relation to the building work. This includes £49,943.82 (inclusive of VAT) which can be verified from his VAT records between 2002 and 2006, invoices in 2011 totalling £148.97, and further invoices for 2012 and 2013 totalling £5,354.70. In addition to theses invoices Mr Stephenson has included a number of miscellaneous costs totalling £4,842.50 These include electrical work totalling £3,130, architects costs of £200, plastering of £620 the cost of the staircase of £70 and the structural engineer of £822.50

If I were to ignore the costs after the institution of these proceedings it can be seen that Mr Stephenson claims costs in excess of £54,000 in respect of the building work alone. In addition Mr Stephenson has provided valuable and skilled labour over a long period of time. In the document he has valued that at £49,000. I am not in a position to comment on that assessment save to note that Mr Stephenson’s labour must be of significant value.

In addition Mr Stephenson has listed some of the other costs to which he has been put. These include the £6,000 he had to pay following the settlement of the boundary dispute, £1,500 in respect of Mr Wholley’s costs relating to the boundary dispute, £984 he had to pay as a result of the final £1,000 being late, planning fees incurred as a result of the amendment to the planning permission.

It is not necessary for me to make specific findings of fact on individual items. It is however perfectly plain and I find that Mr Stephenson has invested very substantial sums of money and time in the redevelopment of Capri Lodge and in Capri Lodge Products.

It is common ground that Mrs Brown’s financial position had deteriorated by the autumn of 2004. In her diary for October 2004 Mrs Brown records that she was paying 80% of her pension to clear her cards.

It is equally clear that Mr Stephenson was more concerned about these debts than Mrs Brown. The creditors were the main banks and credit card companies. Mr Stephenson was concerned that they would seek to enforce their debts against the property in which he had an interest. Mrs Brown did not share his concerns. There were, however, discussions between them and in her diary Mrs Brown referred to them as “third degree”.

On 15^th December 2004 Mr Stephenson telephoned Wholley Goodings to inform them that Mrs Brown was retiring after the New Year and they want something drawn up. On 22^nd December 2004 Mr Wholley prepared a file note to the effect that Mrs Brown needs to retire from the partnership with an option to return at any time.

It seems plain that this followed an instruction from Mrs Brown to Mr Wholley. This is confirmed by an entry in Mrs Brown’s diary which reads:

On 13^th January 2005 Mr Wholley prepared a Notice of Retirement to be signed by Mrs Brown. The document is in 2 parts. Mrs Brown’s part states that she will retire from Capri Lodge Products with effect from a date subsequently inserted to be 21^st January 2005. Mr Stephenson’s part acknowledged that he would admit Mrs Brown back into the partnership under the terms of the November 2003 agreement at any time on her giving not less than 14 days notice.

The document was signed by both Mrs Brown and Mr Stephenson on 21^st January 2005.

On the same day Mrs Brown executed a will appointing Mr Stephenson as her sole executor and (subject to a very minor specific bequest of a pair of plates) left her whole estate to Mr Stephenson. The will was prepared by Mr Wholley and witnessed by him and a secretary in his office.

There is accordingly a strong inference that Mrs Brown visited Wholley Goodings on that day and received advice from Mr Wholley in relation to the will and the notice of retirement.

Mrs Brown’s case is that the Notice of Retirement was not intended to be acted on. She continued working, she continued to attend the markets. She points out that the joint bank account remained in operation and did not cease until March 2006. In fact there were two bank accounts in joint names – one in the name of Capri Lodge Products, the other in the name of Capri Lodge Produce. The Products account appears to have been active and was the account from which the building and other partnership activities were managed. This was closed in November 2005. The other account appears to have been far less active and was closed in March 2006. It is her case that the partnership came to an end in March 2006.

Mr Stephenson does not accept that the Notice of Retirement was a sham. He accepts that Mrs Brown may have attended markets up till about the end of March 2005 but he contends that that was not a partnership activity. He acknowledges that the partnership bank account continued after January 2005 but he points out that he was not responsible for the administration of the bank account.

Mr Wholley has made a file note in relation to an attendance on Mrs Brown and Mr Stephenson on 23^rd February 2005. The file note records an interview lasting 45 minutes. The parties were concerned that Mrs Brown had creditors of £24,000 and that Mr Stephenson was putting more money into the property and was worried that creditors might seize the property.

Mr Wholley advised that a creditor might get a charging order which would enable it to raise 50% of the value of the property. He also advised that subject to finance reflecting the value it would be possible to alter the percentage shares.

There is a further file note indicating that Mr Wholley saw Mrs Brown and Mr Stephenson together on 9^th March and Mrs Brown alone on 22^nd March 2005.

Following the meeting on 22^nd March 2005 Mr Wholley wrote to Mrs Brown on 23^rd March 2005. The letter contained two pieces of advice:

Notwithstanding this advice Mrs Brown telephoned Wholley Goodings on 11^th April 2005 stating that she would like to go ahead with the division of the land as Mr Stephenson had suggested.

On 14^th April 2005 Mr Wholley wrote separate letters to Mrs Brown and Mr Stephenson. The letters are in similar but not identical terms. Each of the letters contains drafts of the transfers of the land. Each makes a point about the taxation consequences of the transfer. Each of the letters refers to the possibility of a Declaration of Trust in respect of Capri Lodge so as to vary the interest to 90% for Mr Stephenson and 10% for Mrs Brown. The letter asks for instructions as to whether this is to proceed.

The letter to Mrs Brown contained advice in the following terms:

The letter to Mr Stephenson contained this paragraph:

The documents prepared by Mr Wholley comprised a TP1 which had the effect of transferring the Paddock into the sole name of Mr Stephenson, and a TR1 which had the effect of transferring the Woodland into Mr Stephenson’s sole name. The consideration for the TP1 of the Paddock was expressed to be

The consideration for the TR1 of the Woodland was similar save that the value was stated to be “not exceeding £1,000”.

On 19^th April 2005 Mrs Brown and Mr Stephenson signed the TP1 and the TR1 at the offices of Wholley Goodings. Their signatures are witnessed by Mr Wholley. His file note reads:

When Mrs Brown gave evidence she had little recollection of the meetings of 23^rd February 2005, 9^th and 22^nd March 2005 or of the two letters written to her by Mr Wholley. She did not think that Mr Wholley did in fact see her alone before she signed the transfer.

She, however, said that she agreed to sign the transfers on condition that they were not to be registered at the Land Registry. As she put it they were to be “under the counter”. When I asked her what she meant by this she said that they were to be put on one side for the time being. They were not to be enforceable. When she signed the transfers she told Mr Wholley in the presence of Mr Stephenson that he was not to register them and that they were to be “under the counter”.

Perhaps unsurprisingly Mr Stephenson did not agree with this evidence. He said that Mrs Brown told Mr Wholley that she wanted to transfer the Paddock and the Woodland to Mr Stephenson for all the hard work he had done on the barn. He expressly denied that Mrs Brown said that the transfers were not to be registered or that the transaction was to be “under the counter”.

There is some support for Mrs Brown’s version in an undated entry from her diary. As the passage also has relevance to her allegation of bullying I shall set it out at some length:

Mr Wholley gave evidence on the last day of the trial. He attended pursuant to a witness summons. In general he supported Mr Stephenson’s version of events. He agreed with the tenor of his evidence that the reason for the transfer was to recognise the hard work he had done. He confirmed that he had advised Mrs Brown against the transfer of the Paddock for the reasons set out in the letter of 23^rd March 2005.

He had no recollection of being instructed by Mrs Brown that the transfers were not to be registered or that they were to be held “under the counter”. Such an instruction would have been unusual and he would have expected that he would have recorded it in the file note. Equally he would not have recorded that they were “happy to proceed”.

Mr Wholley also thought that he had seen Mrs Brown alone before she signed the transfers. He would have wanted to make sure that she was satisfied with the deed that she was signing and that she wanted to proceed. In cross examination by Mr Mundy he refuted the suggestion that the parties had all been in one room throughout the meeting.

On 28^th April 2005 Wholley Goodings delivered to Mr Stephenson a draft will drawn up on his instructions. Under clause 2 Mr Stephenson left his interest in Capri Lodge and share of the business to Mrs Brown.

However at about the same time Mrs Brown received information from SAGA about an equity release scheme that would enable her to resolve her financial problems. When she put the proposal to Mr Stephenson he rejected it in strong terms. Mr Stephenson accepted that he was upset by the proposal. Indeed he said he did not execute the will as a result of the request.

In any event on 29^th April 2005 Mr Wholley wrote to Mrs Brown. In the letter he said that Mr Stephenson was asking for the transfer of the share of Capri Lodge itself so that she would have only 10% to proceed and asked for her views.

When he gave evidence Mr Wholley said he was unhappy with this proposal and “a sense of unease was creeping in”. Mrs Brown replied to the letter on 3^rd May 2005. In the letter she acknowledged that she had agreed a 10/90 transfer but had changed her mind. She pointed out that she had been looking into a “lifetime mortgage” (equity release) but Mr Stephenson “blew a fuse” when she suggested it to him.

On 5^th May 2005 Mr Wholley wrote Mr Stephenson stating that he had no instructions to proceed with the variation of the beneficial interest. The letter continued:

When he gave evidence Mr Wholley did not think he would have registered the two transfers if he had received express instructions from Mr Stephenson not to register them.

The transfers were each dated 3^rd May 2005 and the registration completed by 9^th June 2005.

In early July 2005 an attempt was made to rectify the transfer of the Paddock because Mr Stephenson contended that the plan was inaccurate. Although Mrs Brown countersigned the plan for the amended boundary she would not authorise Mr Wholley to release it until the boundary dispute with Mr and Mrs Hawes was settled. By the time the dispute with Mr and Mrs Hawes was settled it was clear that the parties were in dispute. In those circumstances they were each advised to obtain independent legal advice

During this period on the 4^th July 2005 Mrs Brown saw Mr Wholley and complained that she was unhappy about the transfers of the land and felt that she had been coerced into it. Mr Wholley pointed out that he had spoken to her on a number of occasions both privately and with Mr Stephenson.. He had written her a number of letters and she had signed the documents in his presence. He repeated the advice in a letter dated 6^th July 2005.

By February 2009 Mrs Brown and Mr Stephenson had been occupying Capri Lodge South and Capri Lodge North for about a year. They consulted Miss L Rayne of Swalwell Advice Centre in Newcastle.

Miss Rayne prepared a contract which was signed by the parties on 2^nd February 2009. The contract was subject to the Standard Conditions of Sale. Under the heading “Specified Encumbrances” it provided

Completion was set at 23^rd March 2009. Although the contract contained a number of special conditions there was nothing in the contract to define how Capri Lodge was to be divided. There was, at that time, no plan attached to the contract.

Subsequently on 4^th March 2009 the parties initialled a “Codicil”. One of the terms of the Codicil was that a plan “as pegged out” should be jointly signed. In a letter dated 8^th March 2009 Mrs Brown made it clear she would not agree the plan as proposed by Mr Stephenson. At no time thereafter has there been an agreement as to the plan.

Part of Mrs Brown’s case related to her health problems. Her medical records indicate that in March 2002 she complained of dizziness which she felt might be related to stress, that in July 2003 she had an endoscopy which revealed a hiatus hernia and that in January 2005 she complained of anxiety.

Mr Affleck and Mr McGowan who witnessed various documents signed by Mrs Brown in 2003 did not notice any problems with her health. Both thought she was alright. Mr Affleck thought she was “a fit woman”.

Part of Mrs Brown’s case relies on what she describes as the bullying/ aggressive behaviour of Mr Stephenson. The allegations of bullying are denied and are further examples where there is a conflict of evidence between the parties.

Before turning to the individual complaints a number of points need to be made:

Mrs Brown did not suggest that there was any aggressive/bullying behaviour before 2004. Thus she has no complaints about Mr Stephenson’s behaviour in relation to the 2003 Declaration of Trust and TR1. In evidence she said that they were getting on well at this time.

There is no doubt that Mrs Brown felt under some stress in late 2004 and 2005 in relation to her financial situation. There is equally no doubt that Mr Stephenson was concerned the project into which he was sinking his savings was vulnerable to Mrs Brown’s creditors. Thus I have no doubt that there were discussions about this.

Some light is thrown on the position at the time of the 2005 transfers by the note in Mrs Brown’s diary cited above when Mr Stephenson barricaded himself into his bedroom. She put a note on his door telling him to grow up.

A number of isolated acts of aggression are alleged in the Particulars of Claim. It is alleged that Mr Stephenson threw a meal across the table in October 2003. This is denied by him. There is no corroboration one way or the other. The second incident relates to an incident in September 2004 when Mr Stephenson was attempting to fix some roofing sheets with the assistance of Mrs Brown. There were problems and it is alleged that Mr Stephenson swung round and damaged 4 rungs of a ladder. It is not suggested that any violence was directed at Mrs Brown. Mr Stephenson denies that he damaged the ladder. A further incident is said to have occurred in 2006 when Mr Stephenson is alleged to have thrown a Perspex cup and knocking the wall heater to the floor and shattering the wall sockets. Mr Stephenson denies this.

It was said that in May 2008 Mr Stephenson was rude on the telephone to Mrs Dobson who had agreed to buy a goat from Mrs Brown but failed to pick it up. Mr Stephenson is said to have threatened to shoot the goat if it was not picked up. Mr Stephenson accepts he spoke to Mrs Dobson but does not accept that he used the words she claims.

There was some suggestion that Mr Stephenson threatened to remove Mrs Brown’s goats from the Paddock. However this was not a pleaded allegation. Furthermore although in cross-examination Mr Mundy suggested that this happened prior to the 2005 transfers, Mrs Brown’s witness statement suggests that it may have happened in 2006. It seems unlikely that it could have happened before the transfer of the Paddock as it is unlikely that Mrs Brown would have agreed to proceed with the transfer if she thought her goats would have to be removed.

Apart from the fact that they are uncorroborated there are a number of difficulties with Mrs Brown’s allegations. They are not consistent in the sense that she has described differently at different times. Allegations of physical damage have proved unfounded.

In the end I do not need to make findings on any of the specific allegations. Even if proved I am not satisfied that collectively or individually they amount to a pattern of behaviour amounting to bullying behaviour against Mrs Brown. I am also not satisfied that that Mrs Brown’s decision to execute the documents in 2003 and 2005 was in any way influenced by the alleged behaviour.

As already noted there was no complaint about the behaviour in 2003. I shall deal with the 2005 behaviour later in the judgment

The Law

The leading case on undue influence is the decision of the House of Lords in RBS v Etridge [2002] 2 AC 773. The case is helpful because it contains a modern discussion by Lord Nicholls of the nature of undue influence. I shall not lengthen this judgment by extensive citation from his speech but it is convenient to set out some extracts:

In paragraph 8 Lord Nicholls describes two forms of unacceptable conduct. After referring to improper pressure or coercion he said:

In paragraph 14 Lord Nicholls pointed that that if the 2 matters he had discussed were proved the stage would be set for the court to infer undue influence in the absence of a satisfactory explanation. What amounts to a satisfactory explanation is set out in paragraph 8-026 of 32^nd edition of Snell’s Equity:

In the recent case of Smith v Cooper [2010] EWCA Civ 722 at paragraph 61 the test applied by the Court of Appeal was

In BCCI v Aboody [1989] 1 QB 923, 967E –F Slade LJ giving the judgment of the Court of Appeal defined actual undue influence as follows:

Findings of Fact

The most important witnesses to give evidence were Mrs Brown, Mr Stephenson and Mr Wholley.

I agree with Mr Goldberg that Mr Wholley was an impressive witness. As a solicitor in Morpeth he plainly had many dealings with both Mrs Brown and Mr Stephenson. He kept file notes of important meetings. He was aware of the difficulty in advising both Mrs Brown and Mr Stephenson in a situation where there was a potential conflict between them. It was for that reason he chose to advise Mrs Brown and not Mr Stephenson on the 2005 transactions.

Whilst no doubt Mr Wholley has dealt with many other clients I felt I could rely on his recollections of relevant events.

I indicated in the course of closing submissions that I did not think that either Mrs Brown or Mr Stephenson were dishonest witnesses in the sense that they were deliberately giving evidence that they knew to be untrue. However I did not find either to be wholly reliable witnesses.

The events with which I am concerned took place between 8 and 10 years ago. It is hardly surprising that their memories of the events are not reliable. Mrs Brown’s evidence was in many respects inconsistent with the documents and has not always remained consistent. Furthermore there were many occasions when Mrs Brown candidly admitted that she had no recollection or no detailed recollection of the important meetings.

Mr Stephenson’s evidence was in many respects difficult to follow. He tended to answer questions in an unfocussed way by making longish speeches which were not or only tangentially relevant to the questions he was asked. He did, however, have a detailed knowledge of the documents in the case and to a large extent his evidence was consistent with the documents.

In those circumstances I have found the contemporaneous documents as the best guide to what happened in this case.

I find as a fact that it was not a term of the partnership that Mr Stephenson should complete the building work before being granted a half interest in the three pieces of land. There are a number of reasons for this.

First, there is no mention of this term in any of the documents. The documents refer to the partnership being the consideration for the transfer. Second, as I find, Mrs Brown signed the Transfers in 2002 an 2003 without any objection. Third the advice from Mr Fenny was that the transfers take place immediately. Fourth the file note of Mr Wholley indicates that this was what he was told.

It follows that I prefer the evidence of Mr Stephenson to that of Mrs Brown on the terms of the partnership. The precise extent of the work that Mr Stephenson agreed to carry out was vague. However I accept his evidence that it was work to the value of £22,500 (being half the £45,000 valuation). Even though (as Mr Wholley pointed out later) this should not have been enough to give him a half share this is, I find, what the parties agreed.

I accept in its entirety the evidence of Mr Wholley in relation to the 2005 Transfers. Thus:

I reject Mrs Brown’s evidence that she told Mr Stephenson in Mr Wholley’s presence that the transfers were not to be registered and were to be kept “under the counter”. If those instructions had been given I am satisfied that Mr Wholley would have made a file note of them and would not have noted (as he did in his file note) that they were happy to proceed. It is significant that in July 2005 that he was not to release the amended plan until the dispute with Mr and Mrs Hawes was settled.

I also accept Mr Wholley’s evidence that the explanation he was given for the 2005 transfers was the work carried out by Mr Stephenson. This is, after all, the consideration recorded in the transfers.

I find as a fact that Mr Wholley held private meetings with Mrs Brown on 22^nd March 2005 and immediately before she signed the 2005 Transfers. I am satisfied that he gave her the advice recorded in the letters of 23^rd March and 14^th April 2005 in the March meeting. I am also satisfied that he did indeed make sure that she was satisfied with the deed she was signing and wanted to proceed. At that stage he regarded himself as acting for Mrs Brown and not for Mr Stephenson.

In the light of the contents of Mrs Brown’s diary I have considered whether she might have had a private discussion with Mr Stephenson about the transfers being under the counter and not be registered. The burden of proof on this issue would be on Mrs Brown. It is contrary to her actual evidence that she gave express instructions to Mr Wholley, and it is denied by Mr Stephenson. Her diary note is not or does not appear to be contemporaneous as it appears to have been written after the letter of 3^rd May 2005. In the end I am not satisfied there was such a private conversation.

Discussion and Conclusions

In my view there are no grounds upon which the July 2003 Declarations of Trust and Transfers should be set aside.

First there is no evidence of any pressure placed on Mrs Brown in 2003. She freely admitted that relations were good at the time. It may be that Mrs Brown was suffering from a hiatus hernia and that that was caused (at least in part) by stress but I am not satisfied that those factors had anything to do with the decision to sign the Transfers. I note that the witnesses to the Transfers did not think there was any problem.

Second I am not satisfied that the relationship between Mrs Brown and Mr Stephenson gave rise to a presumption of undue influence. I would not describe Mrs Brown as vulnerable. She was an active lady with commercial experience who had run a business for some time. She was still looking after the financial side of the business and was not reliant on Mr Stephenson for her financial affairs.

Third whilst I accept that it is arguable that the Partnership Agreement favoured Mr Stephenson in that he only had to do £22,500 worth of work to gain a half interest in the property I do not think the benefit is so large that it cannot be reasonably accounted for on the grounds on which ordinary men or women act. The Partnership was a sensible commercial relationship and the transfers can be accounted for on that ground.

Fourth it is plain that Mr Stephenson has acted on the Transfers to his detriment for a number of years without any objection from Mrs Brown. First he has spent very substantial sums and labour in carrying out the conversion works. The moneys spent are considerably more than the £22,500 envisaged. Second, he has spent a further £6,000 in relation to the settlement of the boundary dispute in order to protect his title to a half share of Capri Lodge. In my view having stood by whilst Mr Stephenson carried out the work and spent the monies Mrs Brown should not now be allowed to set aside the 2003 Transfers or the Declaration of Trust.

I accept that the relationship between Mrs Brown and Mr Stephenson was more strained in 2005. I also accept that Mrs Brown had financial problems in 2005 and that Mr Stephenson was concerned that her creditors would seek to enforce their claims against Capri Lodge. I also accept that this was the subject of conversations between them. It is plain that they specifically sought advice from Mr Wholley on this topic in late February and early March 2005.

I am not, however, satisfied that these discussions amounted to undue pressure on the part of Mr Stephenson to coerce or influence Mrs Brown into executing the Transfers. Her own diary note relating to Mr Stephenson barricading himself into the room and the message she left for him do not create the impression that Mrs Brown was bowing to undue pressure from Mr Stephenson. It may be, as she noted in her diary, that the reason that Mrs Brown agreed to the Transfer was to ensure that the piece she owned would not be worth selling. Furthermore it is clear that at the time she made the Transfers she was able to resist the demand by Mr Stephenson for a 90:10 split of Capri Lodge and to attempt to persuade him to agree to an equity release scheme. She also refused to authorise release of the amended plan.

I am equally not satisfied that there is a presumption of undue influence in 2005. Mrs Brown was still not reliant on Mr Stephenson for her financial affairs. Mr Stephenson had done considerably more work on Capri Lodge than the £22,500 envisaged in the contract and thus there was a rational argument for giving more than a half share. There is also an explanation in her diary of why Mrs Brown might have wanted to transfer her half share in the Paddock and the Woodland even though (as Mr Wholley pointed out) it would make her half share difficult if not impossible to sell.

However, even if I am wrong that there is no presumption of undue influence I am satisfied that any presumption is rebutted by Mr Wholley’s evidence. In particular I am satisfied that the transfers were the free exercise of the will of Mr Stephenson as a result of full, free and informed thought. Mr Wholley advised Mrs Brown against executing the Transfers, saw her on the day she signed them and satisfied himself that she was satisfied with them and wanted to proceed.

It follows that I reject the claim based on undue influence

This is a narrow point based on very limited information. It is likely not to matter much whether the retirement date is January 2005 or March 2006. Capri Lodge Products was only trading in a small way. Turnover was less than £6,000 per annum.

In those circumstances it seems to me that considerable weight should be attached to the formal documents.

Instructions were given to Wholley Goodings to daw up a Notice of Retirement on 15^th December 2004. Someone instructed Mr Wholley by 22^nd December 2004 that Mrs Brown was to have an option to return. Both Mrs Brown and Mr Stephenson signed the Notice of Retirement on 21^st January 2005. Furthermore Mrs Brown plainly saw Mr Wholley on that day as he witnessed her execution of a will leaving her whole estate to Mr Stephenson. In addition in a diary note Mrs Brown plainly said she had agreed to retire. There is no mention of it being a sham. Mr Stephenson plainly thought she had retired.

In my view the Court should give effect to these documents. The fact that Mrs Brown may have carried on her limited activities after 21^st January 2005 and that the bank account was not closed for another year is not to my mind sufficient to displace this.

I hold Mrs Brown retired from the partnership on the date specified in the Notice – that is to say 21^st January 2005.

In the light of Mr Goldberg’s concessions in his closing submissions I can deal with the Counterclaim quite shortly. In my view there was no concluded contract as to partition of Capri Lodge. Whilst Mrs Brown may have agreed in principle to partition the precise boundaries were never agreed. Equally the Agreement signed by the parties in February 2009 was incomplete in that it did not contain any means of deriving the boundaries between the two partitioned properties. Attempts to resolve this problem were not successful as Mrs Brown never agreed the proposed plan.

Equally there is no document satisfying section 2 of the Law of Property (Miscellaneous Provisions) Act 1989.

It follows, as Mr Goldberg conceded, that the Counterclaim fails.

At one time during the course of the hearing I raised the possibility of making an order for the partition of Capri Lodge under the provisions of the Trusts of Land and Appointment of Trustees Act 1996. However, as I indicated in the course of closing submissions I do not propose to do so. There is no a pleaded claim for partition. Thus I have not heard argument or evidence on relevant matters such as the value of the partitioned parts. It has to be remembered that the planning permission for Capri Lodge is restricted. As noted above the occupation is limited to persons solely or mainly employed in the agricultural business at Capri Lodge. Mrs Brown no longer owns any part of the Paddock or the Woodland. Thus if there were an order for partition she might not be able to occupy Capri Lodge. Furthermore the value of her part might be affected. Thus whilst the planning restriction exists a partition would or might operate unfairly to Mrs Brown.