Robert Jewkes v Samuel Watson & Ors

The Claimant, Robert Jewkes, is a solicitor of many years’ qualification. Aside from his legal work, he has invested from time to time in property and businesses, and from 2019 onwards he lent money to the Third Defendant, Gavin Watson (and to his company, SnB Brands Limited) for both business and personal purposes. By a deed of assignment dated 15 September 2021 he assigned all those debts to the First and Second Defendants, Samuel and Emily Watson, who are the Third Defendant’s two elder children. He brings this claim against the First and Second Defendants for recovery of the sum payable to him under the deed of assignment. That claim is defended on the basis that the First and Second Defendants entered into the deed of assignment by reason of either actual or presumed undue influence, and they counterclaim for a declaration setting aside the deed. In the alternative, should their defence be successfully made out and the deed set aside, the Claimant claims against the Third Defendant under the original loan agreements.

In this judgment, to avoid confusion between the two generations, I will refer to Gavin Watson and his wife Paula Watson as “Mr Watson” and “Mrs Watson”, and to Emily Watson and Samuel Watson as Emily and Samuel.

References in this judgment to sums denominated in dollars are to US dollars unless otherwise indicated.

The facts of the transactions that have led to this litigation are not substantively disputed by the parties: the dispute concerns the interpretation to be placed on those facts. The debts which Mr Jewkes seeks to recover were initially incurred by Mr Watson. At the time when he was introduced to Mr Jewkes by a mutual acquaintance, in Hong Kong in early 2019, he and his family (Mrs Watson and their two younger children) had fallen on hard times financially: they were homeless and were spending the last of their savings on a room in a budget hotel.

Mr Jewkes lent money to Mr Watson personally to enable him to pay a rental deposit on a place to live. He subsequently lent further funds to Mr Watson to enable him to pay school fees for the two children. In total, the funds loaned for Mr Watson’s personal purposes amounted to HK$233,000.

Initially Mr Jewkes had no interest in investing in Mr Watson’s business interests. When he met Mr Watson, Mr Watson had identified an opportunity to invest in an online retail business, SnB Brands Limited. After some discussions (the precise content of which is disputed between the parties), Mr Jewkes lent $225,000 to Mr Watson for business purposes, initially without any formality. Mr Watson acquired SnB Brands Limited through a shelf company, Ever Successful Limited: Mr Jewkes provided the funding via Zhong Lun, a firm of Hong Kong solicitors. Mr Watson acquired office space for the business and began to pay himself a salary as CEO of SnB Brands Limited in June 2019.

Formal loan agreements for $225,000 and for HK$233,000 between Mr Watson and Mr Jewkes were subsequently drawn up by Zhong Lun and dated 23 July 2019. Initially both loans were interest free, and no repayment schedule was specified, although each was repayable on demand following a short period of notice. $150,000 of the $225,000 loan was convertible on demand by Mr Jewkes into preference shares, being at least 50% of the shares in Ever Successful Limited. Mr Jewkes never exercised his entitlement to convert the loan to preference shares.

Those two loan agreements were subsequently amended and restated in October 2019, and again on 21 January 2020.

The business did not prosper as the parties had hoped. On 21 January 2020 a further loan agreement was entered into, to provide an additional $100,000 of working capital to the business. Unlike the earlier two loans, this one was subject to interest at a rate of 1% per month and was made between SnB Brands Limited and Mr Jewkes. Like the others, it contained no payment schedule but was repayable on demand.

The business continued not to prosper. No repayments under the loan agreements were ever made by either Mr Watson or SnB Brands Limited. Mr Watson’s evidence was that he ceased to be able to pay himself a salary in 2022.

Mr Jewkes sought to put SnB Brands Limited into creditors’ voluntary liquidation in 2021 to enable him to recoup at least part of the money he had lent. Mr Watson, still persuaded that the business had the capacity to be profitable, resisted this. Eventually Mr Jewkes served statutory demands for repayment on Mr Watson and SnB Brands Ltd in July 2021, and expressed the intention to put the business into compulsory liquidation.

Following the issue of those statutory demands, it appears that it was suggested by Stuart Corby, a mutual acquaintance of Mr Jewkes and Mr Watson who carried on some work for SnB Brands Limited, that the debts might be assigned. The initial proposal (referred to in an email from Mr Watson to Mr Corby on 20 August 2021) was that they might be assigned to Mrs Watson, but it appears that that was not acceptable to Mr Jewkes. Mr Watson had also asked Samuel by email on 26 July 2021 to look into the possibility of taking out a bank loan to prop up the business, but Samuel was unable to do so. Eventually Mr Jewkes and Mr Watson settled on assignment to Samuel and Emily, although there is no documentary evidence of how this decision was reached and neither of them was able to shed light on this in their oral evidence.

Samuel and Emily had had no involvement with the business, and were both living in Scotland at the time of the assignment. They were aged, respectively, 24 and 22 at the time of the assignment. Samuel was employed as an engineering graduate trainee. Emily had recently graduated and was unemployed.

The deed of assignment was drafted by Mr Watson’s solicitors, and was shared in draft with Samuel and Emily on 31 August 2021. All negotiations concerning the draft deed took place between solicitors for Mr Jewkes and solicitors for Mr Watson. Samuel and Emily had no direct involvement in the negotiation of the deed of assignment, and were not legally represented. They saw an initial draft of the deed of assignment but did not see the final version until much later: they were sent a blank signature page to execute and send on, which they did in accordance with Mr Watson’s instructions.

The deed of assignment assigned all Mr Jewkes’ rights under the three loan agreements to Samuel and Emily, in consideration of a payment of $727,000 to Mr Jewkes, to be made in accordance with the payment schedule set out in the deed of assignment. The payment schedule provided for payments of $30,000 quarterly for the first year following execution of the deed, and then repayment of the outstanding balance plus 10% interest on 31 August 2022.

One payment of $30,000 was made following the deed of assignment: it was paid by SnB Brands Limited to Mr Jewkes on 17 January 2022. On 18 January 2022 Mr Jewkes sought confirmation from Samuel that the payment was intended to be made in accordance with the deed of assignment. Following some correspondence between Samuel and Mr Watson he received that confirmation.

After that initial payment, no further payments were made. Mr Watson emailed Samuel on 23 February 2022 to say that he would not be able to fund the next payment when it fell due, and that Samuel and Emily would have to negotiate an alternative repayment schedule. Samuel and Emily wrote to Mr Jewkes (following an email exchange with their father about the appropriate wording for the message) on 27 February 2022 explaining that Mr Watson had been having cancer treatment since September and seeking further time to pay. They proposed that the payment schedule should be modified to provide for smaller payments over a longer period.

On 31 March 2022, Mr Jewkes replied as follows:

“As of today's date, I have received no notification from either you, or HSBC UK, that payment of US$30,000 due on 28th February 2022 has been paid into my account at HSBC UK in accordance with the Deed.

Clause 3.2 of the Deed provides, that failure to make timely payment of an amount due, results in the whole of the amount outstanding under the Deed as at that date, together with interest due on the outstanding balance, becoming immediately due and payable.

Accordingly, the sum of US$697,000, together with interest due thereon amounting to US$38,243, is now immediately payable. I wish to receive payment of these amounts immediately. Interest is accruing on the unpaid balance of US$735,243 at the rate of US$201 per day.

I am saddened to hear of your father’s illness. It is for you to decide whether to take these circumstances into account when seeking to recover sums to which you are entitled under the loans assigned to you under the Deed. These circumstances are not relevant to the arrangements between us, and have no bearing on your obligations to me under the Deed.”

No further payments were made, and no revised schedule of payment was agreed. These proceedings were commenced in April 2024, initially against Samuel and Emily only, for enforcement of their payment obligations under the deed of assignment. Mr Watson was subsequently added as a defendant by amendment of the claim. The claim against him is brought under the original loan agreements, and is brought only in the alternative, in the event that the court determines that the deed of assignment should be set aside.

The hearing took place over three days, and I heard oral evidence from Mr Jewkes, Samuel, Emily, Mr Watson and Mrs Watson as well as legal submissions on the parties’ behalf. I should particularly mention the extremly clear and helpful submissions of Ms Liao, who acted pro bono for Samuel and Emily.

The claim is resisted by Samuel and Emily on the grounds that their agreement to the deed of assignment was procured by their father’s undue influence over them. They plead both actual undue influence – that he put them under pressure to sign, that he represented to them that the deed would have no effect on them, and that if they did not sign it their parents and younger sisters would be destitute – and a presumption of undue influence based on the parent-child relationship.

They assert that the assignment had no benefit to them. They therefore argue that it was a “transaction that requires explanation”, and that Mr Jewkes had constructive notice that it was entered into by reason of undue influence and it should be set aside. (There was an initial attempt to plead that he had actual knowledge of undue influence, but Ms Liao very wisely did not pursue this at trial as it is not supported by the facts. Mr Jewkes had met Samuel and Emily socially, but only on two occasions, and there was nothing to suggest that he would have known the extent of their father’s influence over them.)

Initially they also pleaded duress, non est factum and frustration of the agreement. Those three defences were struck out by Master Clark in a judgment following a hearing on 17 November 2023, as the legal analysis showed that they were unsustainable, but they were permitted to proceed with the defence of undue influence.

They seek an order setting aside the deed of assignment, and the dismissal of the claim against them.

Mr Watson accepts that the initial loan for HK$233,000 is repayable to Mr Jewkes, although he asserts that he lacks the means to repay it. In respect of the other two loans he also resists the claim, on the basis of the undue influence which Mr Jewkes is said to have exerted over him. Mr Watson argues that he was particularly vulnerable to undue influence by reason of poverty at the relevant time. He also seeks an order dismissing the claim, and setting aside the loan agreements.

There is extensive case law on the requirements placed on a lender in circumstances where one party to an agreement (usually a suretyship arrangement) may be subject to the undue influence of another, and the lender is placed on constructive notice of the undue influence because the transaction is one which requires explanation. The leading case is Royal Bank of Scotland v Etridge (No.2) [2001] UKHL 44. In that case Lord Nicholls described undue influence as follows at [6-8]:

“The issues raised by these appeals make it necessary to go back to first principles. Undue influence is one of the grounds of relief developed by the courts of equity as a court of conscience. The objective is to ensure that the C influence of one person over another is not abused. In everyday life people constantly seek to influence the decisions of others. They seek to persuade those with whom they are dealing to enter into transactions, whether great or small. The law has set limits to the means properly employable for this purpose. To this end the common law developed a principle of duress. Originally this was narrow in its scope, restricted to the more blatant forms of physical coercion, such as personal violence.

Here, as elsewhere in the law, equity supplemented the common law. Equity extended the reach of the law to other unacceptable forms of persuasion. The law will investigate the manner in which the intention to enter into the transaction was secured: "how the intention was produced", in the oft repeated words of Lord Eldon LC, from as long ago as 1807 (Huguenin v Baseley 14 Ves 273, 300). If the intention was produced by an unacceptable means, the law will not permit the transaction to stand. The means used is regarded as an exercise of improper or "undue" influence, and hence unacceptable, whenever the consent thus procured ought not fairly to be treated as the expression of a person's free will. It is impossible to be more precise or definitive. The circumstances in which one person acquires influence over another, and the manner in which influence may be exercised, vary too widely to permit of any more specific criterion.

Equity identified broadly two forms of unacceptable conduct. The first comprises overt acts of improper pressure or coercion such as unlawful threats. Today there is much overlap with the principle of duress as this principle has subsequently developed. The second form arises out of a relationship between two persons where one has acquired over another a measure of influence, or ascendancy, of which the ascendant person then takes unfair advantage. An example from the 19th century, when much of this law developed, is a case where an impoverished father prevailed upon his inexperienced children to charge their reversionary interests under their parents' marriage settlement with payment of his mortgage debts: see D Bainbrigge v Browne (1881) 18 ChD 188”

Lord Nicholls further identified that, for a lender to be put on notice of potential undue influence, there should be a “transaction that calls for explanation” (rejecting the language of “manifest disadvantage” used in some of the earlier case law).

In those circumstances, to protect itself and ensure that the party potentially subject to undue influence is entering the transaction with full knowledge of its effects, the lender should ensure that the party who may be subject to the undue influence of another has independent legal advice before entering into the transaction.

I was referred to Nelson Enonchong’s Duress, Undue Influence and Unconscionable Dealing (4^th edition) by the parties. That textbook sets out (at 23-003) that, where a party to a contract is on actual notice that the contract has been procured by undue influence, the contract may be set aside. However, where there is no actual notice, the circumstances where constructive notice will operate to impose obligations on the lender, or to enable the borrower to set aside the contract, are more limited. Etridge and its predecessor cases relate to guarantees of loans, usually by one spouse on behalf of the other. Enonchong allows for the possibility that it will apply to other cases which have “features similar to” a suretyship transaction, and gives the example of a consent given by a resident spouse to a charge on the property as security for a loan to the other spouse.

Enonchong identifies certain key features that a transaction must have for the Etridge principles of constructive notice to apply. First, it must be a tripartite transaction – in a classic suretyship transaction, the lender, the borrower and the guarantor. Second, the relationship between the guarantor and the debtor must be non-commercial in nature. Thirdly, it must be apparent that the guarantor receives no benefit from the transaction – a transaction in which a party does receive some benefit does not “require explanation” in the same way.

A very recent case before the Supreme Court in which the transaction was not a classic suretyship was One Savings Bank v Waller-Edwards [2025] UKSC 22. In that case the claimant bank had advanced funds jointly to Ms Waller-Edwards and her partner, secured by a charge over a property which she owned beneficially as to 99% and her partner owned beneficially as to the remaining 1%. It was not, therefore, a conventional suretyship transaction. However, the Supreme Court considered that the analysis set out in Etridge applies not only in a conventional suretyship transaction, but also in a “hybrid” transaction where a part of joint borrowing is undertaken for the sole benefit of one party, and the lender is on notice of that fact. The court distinguished the situation in which one spouse or partner acts as guarantor for the other’s debts from that in which borrowing is undertaken jointly, as only in the first case is the lender placed on inquiry as there is no obvious benefit to the guarantor. Lady Simler JSC helpfully set out the meaning of “constructive notice” in a case of this kind at [40], as follows:

“Thirdly, as Lord Nicholls emphasised in Etridge No 2, although the trigger for action by a bank is described as being “put on inquiry”, this is not an inquiry in the traditional constructive notice sense. The bank does not have to carry out any investigation or to ask any questions about the reasons why the wife was agreeing to the transaction or about her relationship with her husband. The bank is not expected to try to find out whether or not undue influence or misrepresentation is taking place, or indeed whether it is being misled as to the purposes of the loan. The bank is simply on notice of a risk of undue influence or similar impropriety. The most the bank is then expected to do is to take reasonable steps to minimise the risk that such a wrong may be committed by satisfying itself that the wife (or vulnerable partner) has had brought home to her, in a meaningful way, the implications of the proposed transaction, so that if she continues with it, she does so with her eyes wide open”

Waller-Edwards extends the principles set out in Etridge to the “hybrid” situation where joint borrowing is undertaken, but in reality part of the borrowing is for the exclusive benefit of one party only (in this case to fund repayments of other debts incurred by the claimant’s partner), and the bank is on notice of that fact. The “features” identified by Enonchong are all present.

In relation to each defendant, therefore, I must consider the following points in the light of the applicable case law:

I will consider the analysis first in relation to the First and Second Defendants, and then to the Third Defendant, as the arguments are quite different.

I will first deal with the question of actual undue influence by Mr Watson before moving on to presumed undue influence, and as to this I must consider Samuel and Emily separately.

Samuel was 24 years old and in full-time employment at the time when he executed the deed of assignment. He had also been named as a director of a company set up by Mr Watson (Saddler Ltd) from its incorporation in November 2018 to its dissolution in October 2020. However, when this was put to him in cross-examination he seemed entirely surprised to discover that he had been a company director at all. I found his denial credible, and there was no evidence that he had ever taken an active role in that business.

He had also had a short appointment (a matter of months only) as a consultant to SnB Brands Limited. His evidence was that he had carried out a single task for the company and been paid for it, but that he had had no wider involvement in the business. Again, I find this evidence credible: he had been a student at the time earning some additional money by doing some work for his father’s company, and there is nothing to suggest that he had any wider role.

Samuel was clearly intelligent and well-educated, but unfamiliar with the business world: his employment is as a graduate engineering trainee. His evidence was that he knew nothing about business and would defer to his father’s judgment. His father, he said, was the family patriarch and breadwinner and everyone deferred to his judgment. It was also his evidence that he and Emily had been entirely reliant on their father’s advice at the time of the assignment.

Emily is younger than Samuel and was only 22 at the time of entering into the deed of assignment. She has suffered from mental health difficulties since she was 15 years old, and these are not disputed by Mr Jewkes. There is no suggestion that she had any knowledge or understanding of the business world.

There was relatively little documentary evidence in this case of the discussions taking place between Mr Watson, Samuel and Emily around the time of the assignment. The email from Mr Watson to Samuel and Emily, dated 31 August 2021, which sent them the first draft of the deed of assignment, read as follows:

“This is the formal document for signing later

Please read it, yes, it sounds daunting but it is what it is and Daddy will make sure you guys are not affected by it!

We can talk about it later, just let me know when suits you”

That email was either immediately preceded or immediately followed – the evidence was not consistent on that point, but I do not attach much importance to that as the parties were giving evidence of events more than four years ago – by a telephone call between Samuel, Emily and their parents. The Amended Defence and Counterclaim for Emily and Samuel refers to them having been told on that call that their parents would be “unable to put food on the table” for their younger sisters. Neither Samuel nor Emily repeats this claim in their witness statements, and Samuel was unable to recall, in oral evidence, whether that language had been used or not. Emily’s evidence in cross-examination was that she vividly remembered being told that her sisters, whom she described as “her world”, would be homeless. Although she was very distressed by the process of giving evidence, I found her a clear and entirely credible witness. I also note that the family had had a previous recent experience of being in serious financial trouble and living in a budget hotel, at the time when Mr Watson first met Mr Jewkes: this would have made it more likely that Mr Watson would have described the likely consequences of the business going into liquidation in such dramatic terms, and also more believable to Samuel and Emily.

I find, on the balance of probabilities, that she and Samuel were told, around the time when they were sent the draft deed, that there would be dire consequences for the rest of their family. It is also clear from the documentary history that they were not warned of the true consequences of entering into the assignment – indeed, they were positively misled by Mr Watson’s assurance that they would not be affected by it. Both Samuel and Emily said in evidence that they felt they had no option but to sign.

Ms Hadkiss argued that the evidence for actual undue influence, at least in Samuel’s case, was slight. Samuel had been financially independent of his father in matters of day-to-day spending for five or six years by the time the assignment was entered into. He lived in another country and had a responsible job at that time, and was not obviously subject to his father’s control. She also pointed out that there was very little documentary evidence of pressure and coercion being applied. Although I accept that there is little written evidence of pressure or coercion, there is documentary evidence of Mr Watson steering the process and downplaying the consequences to them of signing the document, and Samuel and Emily have been consistent that the key element in persuading them to sign the document was a phone call in which they were told that they had no choice but to sign. It is also clear from the documentary evidence that they were not involved in the negotiation of the document at any point: that took place entirely between solicitors for Mr Jewkes and Mr Watson.

Ms Liao argued that the evidence showed that the negotiation of the terms excluded Samuel and Emily altogether: they were not legally represented, and the negotiations took place between David Flint, who acted for Mr Watson, and solicitors for Mr Jewkes. They did not even see the final version of the deed at the date of signature: they were sent the signature page only for execution. All this suggests that they were not truly decision-makers in the process.

For reasons I will come to later in this judgment, I treat Mr Watson’s evidence with some caution. However, I note that he also was clear that he strongly advised Samuel and Emily to sign the document, and that he emphasised the consequences to the rest of the family of not doing so, while assuring them that the document would have no impact on them. That is consistent with the written record and with Emily’s evidence that they were told they were to be “middlemen” between Mr Watson and Mr Jewkes, who were no longer speaking to one another.

There was no evidence to support a contention that they were told they would positively benefit from the assignment: Ms Hadkiss put this to both Samuel and Emily in cross-examination, and both rejected it. There is nothing in the documentation to support the suggestion.

Ms Hadkiss put her arguments against undue influence persuasively, but I reject them. I find, on the balance of probabilities, that both Samuel and Emily were placed under actual undue influence, in that they were put under considerable emotional pressure to sign the document, without having any of the consequences of signing explained to them – indeed they were positively misled as to the consequences for them. I had no hesitation at all in coming to this conclusion in relation to Emily, and the Claimant fairly accepted that she was a vulnerable individual.

The position was less clear in relation to Samuel: he is a more robust individual, and in my view some of his evidence about Mr Watson’s patriarchal and domineering nature was exaggerated: it consisted of assertion without particulars and does not seem wholly consistent with his independent life. However, I have no reason to disbelieve his evidence that he lacked knowledge about business, and would follow his father’s guidance and defer to him in business matters. I also consider, in the light of Emily’s evidence, that on the balance of probabilities he was told that his younger sisters and parents would suffer if he did not sign the document. I accept that he too was subject to undue influence.

If I am wrong about the existence of actual undue influence, I have to consider whether there is in any event presumed undue influence. Parent and child is one of the paradigm cases in which undue influence is presumed to exist: Samuel and Emily were Mr Watson’s children and that fact was known to Mr Jewkes at the time of the assignment.

Ms Liao submitted that the presumption is irrebuttable, on the basis of an obiter observation by Lord Nicholls in Etridge at [85] that “The relationship between parent and child is one of the relationships where the law irrebuttably presumes trust and confidence.” In the previous paragraph Lord Nicholls gives the example of a daughter acting as surety for a father, so clearly has in mind an adult child and parent.

Ms Hadkiss accepted that parent and child is a case where presumed undue influence does exist, but pointed out that that sentence is obiter, and suggests that logically an irrebuttable presumption creates difficulties: is an adult child in his or her forties or fifties still under “parental dominion”? I find that this submission has some force, especially when one considers the possibility of a vulnerable elderly parent and a middle-aged or older “child”: there are certainly circumstances in which the undue influence might, inreality, be exercised in the opposite direction.

Ms Hadkiss drew my attention, in particular, to the much earlier case of Lancashire Loans Ltd v Black [1934] 1 KB 380, in which the court considered whether or not a young woman who had married and moved away from the parental home was still under “parental dominion” and had therefore been unduly influenced by her mother in entering jointly into a promissory note. The court in that case (which admittedly substantially pre-dates the Etridge line of case law) concluded that, although the daughter in that case was a young adult and had married, the presumption was not rebutted: it does not appear to have considered the possibility that the presumption of undue influence was irrebuttable.

However, I do not need to determine the point as I accept Ms Liao’s submission that if the presumption is rebuttable the threshold for rebuttal is a high one, and is not reached in this case. Samuel and Emily were still young and inexperienced, and although their father had no control over their day-to-day lives and finances, they were still under “parental dominion” in major decisions of this kind, especially in the business world, with which their father was familiar but they were not. There is insufficient evidence to rebut a presumption of undue influence over them in this transaction.

I therefore find that Samuel and Emily entered into the assignment under the undue influence of their father, and must move on to consider whether Mr Jewkes was aware of facts that meant that the transaction “required explanation”.

It is not disputed that Mr Jewkes knew that Samuel and Emily were Mr Watson’s two elder children, and that the assignment was not a commercial arrangement.

He was also aware that they were not receiving legal advice: David Flint, from Inksters, the firm of solicitors acting for Mr Watson, sent the following email to Taylor Wessing, acting for Mr Jewkes, on 7 September 2021:

“I am advised that the assignees do not have a lawyer and do not intend to appoint one. I am informed that they are happy to proceed on the basis of their discussions with the family and the advice given by their father. Please can you direct any observations and revisions to the draft to me and I will arrange for them to be passed on”

Mr Jewkes will, of course, have been aware that Mr Watson would not be an impartial adviser in these circumstances. His solicitors responded to that email to say that they hoped to be able to move swiftly to execution of the deed.

Ms Hadkiss submits that the transaction was not one that “required explanation” because the assignment of Mr Watson’s debts to Samuel and Emily was a benefit to them: they could, in principle, have recovered funds under the original loan agreements from Mr Watson and SnB Brands Ltd. Ms Hadkiss submitted, correctly, that the fact that bringing legal proceedings against a family member is emotionally difficult does not affect the legal position: as a matter of law the remedy exists. It is of course true that Samuel and Emily had the option to bring proceedings against Mr Watson for recovery of the debts that had been assigned to them. But the fact that to recover they would have to sue their own father is a matter of which Mr Jewkes should have been aware, and it plays into the question of whether he was on notice that the transaction “required explanation”.

Ms Liao strongly disagreed with the submission that there was a benefit to Samuel and Emily, noting that Mr Jewkes had been on the point of putting SnB Brands into liquidation before the deed of assignment was mooted, and had actually reached the point of serving statutory demands. The benefit, she argued, was illusory. Mr Jewkes admitted in cross-examination that he had been unable to find any investor in SnB Brands Ltd, and that he had no expectation that the statutory demands would be complied with. He knew, therefore, that Samuel and Emily were taking on a very substantial liability for very little, if any, benefit (compounded by the emotional difficulty inherent in bringing proceedings against their father to recover the debts).

It is possible that, as at the date of the deed of assignment, there was some value in either or both of SnB Brands Limited and Ever Successful Limited, or that Mr Watson might have obtained some funds from another source (although whether he would have applied them in repaying his children is at the very least open to doubt). However, I do not find it credible that Mr Jewkes thought that there was significant value in the debts at that time, still less that he really believed that they were worth anything close to the figure of $727,000 plus interest.

He was, therefore, on notice that the debts were valueless or of minimal value, and that the transaction Samuel and Emily were entering into imposed a heavy burden on them and “required explanation”.

Enonchong, drawing on Etridge itself, identifies three key features – a transaction must be tripartite, there must be a non-commercial aspect to it, and there must be no benefit to the guarantor. This transaction is not a suretyship agreement but an assignment of debt, and therefore I must consider whether it shares the features of a suretyship, enabling Samuel and Emily to rely on the Etridge principles to set the transaction aside.

Ms Hadkiss submitted that it does not: this is a bilateral agreement between Mr Jewkes on the one hand and Samuel and Emily on the other, and (as noted above) she argued that it is not a case where there is no benefit to the assignee. The case law should be strictly applied as the potential consequences of such an extension of the case law would be commercially very significant and untenable.

Ms Liao submitted that this case had the features of a suretyship. Although the deed of assignment was executed by Mr Jewkes, Samuel and Emily, the reality of the situation was that there were three parties: Mr Watson negotiated the agreement, directed Samuel and Emily in what to do and signed a document, annexed to the assignment, confirming his agreement to the assignment of the debts. Mr Jewkes was, of course, aware that the relationship between Mr Watson and his children was not of a commercial nature. As discussed above, the transaction was of no benefit to Samuel and Emily: they had a theoretical right to recover from their father and SnB Brands Limited, but it was unlikely in the extreme that they would receive anything.

Ms Liao also drew my attention to the decision of the Supreme Court in One Savings Bank vWaller-Edwards, discussed at paragraphs 31-32 above. That case involved a loan in the joint names of the claimant and her partner, where part of the loan sum had been borrowed for the exclusive use of her partner. Ms Hadkiss argued that that factor means that it should be regarded as a suretyship transaction, but in strict legal terms that cannot be right: in form it was a joint loan, but the court had no hesitation in applying the Etridge principles to the portion of the loan applied for the partner’s benefit, because it shared the features of a suretyship transaction – namely that there was no benefit to the claimant in that part of the loan, and the lender was aware of that fact.

Applying Waller-Edwards, I find that the transaction in this particular case does share all the key features of a suretyship transaction.

Ms Hadkiss argued that an extension of the Etridge line of cases to other types of commercial loan arrangement, beyond suretyship, requires very careful thought. I accept that and have considered the position carefully. The particular circumstances of this case, and its peculiar features, do not seem to me to be likely to be replicated often – considerably less often than the classic Etridge scenario of one spouse standing surety for the other’s borrowing – as the arrangement was not beneficial to either Mr Jewkes (who was no more likely to obtain repayment than before, as Samuel and Emily lacked the means to pay him) or, evidently, to Samuel and Emily.

In this case, debts that were likely to be worth no more than a small fraction of their face value were assigned to Samuel and Emily, who took on an onerous and enforceable obligation to make payments to Mr Jewkes in return. Mr Jewkes was aware that they were the adult children of the original borrower, and could see, as an experienced solicitor and businessman, that the transaction was not beneficial to them. It was therefore a transaction which, in the language used by Etridge, “required explanation”. He was also on notice that they had not had any independent advice, and that their father was advising them. Although he knew little of their personal circumstances, he had met them both and knew that they were young people in the early stages of their working lives, and should have been alive to the possibility that they were being unduly influenced by their father.

I find that the defence of undue influence is made out and the deed of assignment to Samuel and Emily must therefore be set aside. The claim against Samuel and Emily is dismissed. Mr Jewkes’ claim is therefore now against Mr Watson under the original loan agreements.

Mr Watson seeks to resist this claim, in so far as it relates to the loans for $225,000 and $100,000, on the basis that he was subjected to undue influence by Mr Jewkes, that it was an unconscionable bargain and (although this was not pleaded till trial) that Mr Jewkes owed him a duty of candour.

I should note here that Ms Hadkiss submitted that the Watson family members colluded to defend the claims on the basis that they were all the subjects of undue influence. I do not accept that submission: the question of undue influence arose for the first time when Samuel and Emily sought independent legal advice from Mitchells Roberton, a firm of Scottish solicitors, who wrote to Mr Jewkes on their behalf on 24 November 2022, following service of a statutory demand on Emily. However, it does appear to me that Mr Watson has seized on the arguments being made on behalf of Samuel and Emily and hopes to benefit from them even though his position is substantially different in all respects.

In brief, Mr Watson argues that Mr Jewkes was aware of his precarious financial position (which is clearly correct: Mr Jewkes lent him money to get the family back onto an even keel), and that Mr Jewkes exploited his position to make a sequence of unconscionable bargains with him in lending him money for his business purposes. Mr Watson argues that he was in a position of substantial disadvantage relative to Mr Jewkes, and that Mr Jewkes sought to exploit that by imposing unreasonable and oppressive terms on him. He also argues that Mr Jewkes owed him a duty of candour, which was breached.

The “unconscionable bargain” is said to have arisen because Mr Watson was vulnerable to exploitation by reason of poverty. However, this argument is untenable: by the time the first of the loan agreements was entered into, Mr Watson was no longer in poverty thanks to the financial assistance he had received from Mr Jewkes. Mr Copello submitted on Mr Watson’s behalf that the terms of the loans were unconscionable because they provided for repayment on demand at short notice, and that he was effectively coerced into signing them. However, he conceded that there was no direct coercion applied: the pressure is said to have arisen from Mr Watson’s consciousness of his existing indebtedness to Mr Jewkes.

I reject the submission that the loan agreements constituted an unconscionable bargain. Overall the loans were very generous in their terms: the initial loan of $225,000 made no provision for payment of interest at all, and there is no evidence that Mr Jewkes held the threat of repayment on demand over Mr Watson’s head. Mr Jewkes’ evidence, which I accept, was that the lack of a repayment schedule was to provide flexibility.

Mr Watson also argues (for the first time at trial: this was entirely unpleaded at earlier stages of the case) that Mr Jewkes owed him a duty of candour. I do not have to consider this, as it was not properly pleaded, but note for completeness that it is also untenable: there was no relationship of trust and confidence that would give rise to such a duty. While Mr Jewkes is a solicitor by profession, he was never Mr Watson’s solicitor: the relationship was that of one businessman to another. Even if a duty of candour had been owed, there was no explanation as to how it was said to have been breached, save for a suggestion that Mr Jewkes should have advised Mr Watson to take legal advice. There is no obligation on a person to advise their contractual counterparty in a commercial transaction to take legal advice, and Mr Copello was unable to identify any case law that points to such an obligation.

In the light of my findings in relation to undue influence and unconscionable bargain, I do not have to consider whether the transactions between Mr Jewkes and Mr Watson “called for explanation”, but I note for completeness that they are completely commercially explicable: Mr Watson wanted capital to set himself up in business and then sought further working capital to continue the business, and Mr Jewkes was willing to provide it (albeit, as matters fell out, he was taking a considerable commercial risk which did not pay off).

Mr Watson also argued that Mr Jewkes had reneged on an alleged oral agreement to become an equity investor in SnB Brands Limited. This too was untenable: there was clearly discussion of the possibility of equity investment in the spring of 2019, and eventually the loan agreement that was entered into in July that year provided for an option for Mr Jewkes to convert part of the loan into shares. However, there was simply no evidence to suggest that there was any binding agreement to take shares: it was one possibility among others.

Mr Watson, having borrowed substantial amounts of money from Mr Jewkes and finding himself unable to pay it back, tried to avoid repayment by shuffling the responsibility onto Emily and Samuel, in the confident assumption that they would not seek to enforce the underlying debt. (Why Mr Jewkes agreed to this arrangement is a mystery which remained unresolved at the hearing.) He then seeks to avoid the responsibility for his own poor financial decision-making by casting the blame onto Mr Jewkes, and this is simply not supported by the evidence.

The claim against Mr Watson succeeds: Mr Jewkes is entitled to recover the funds payable under all three loan agreements.

The claim against the First and Second Defendants is dismissed and the assignment to them is set aside.

The claim against the Third Defendant succeeds, and the Claimant is entitled to obtain the original loan sums under the loan agreements, together with interest and costs, from the Third Defendant.