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A moment of Clarity

Lifetime gifts and undue influence

This is a rather sad and cautionary tale where in 2010 a father, Neville, then aged 67 transferred a property to his son Bradley then aged 43. The property transferred was Neville’s home in St Albans that he shared with his partner Linda, and was worth about £375,000. Neville later proclaimed that there had been undue influence and that the transfer should therefore be set aside.

The law on undue influence is based upon there being a relationship of trust and confidence between the person influenced and the alleged influencer. Some relationships are presumed to fall into this category, such as the relationship between a parent (as influencer) and a child, but it does not work the other way round; so whether a child’s relationship with their parent is one of trust and confidence, this must be established on the evidence.

Alternatively it may be shown that the relationship is one involving the domination or control of a vulnerable person. The transaction in question must also require an explanation – for example, it is not reasonably accounted for in the ordinary course of events.

If these things are present, then a presumption arises that there has been undue influence, and it falls to the recipient of the gift to show that in fact the transaction was entered independently and free from any undue influence. This might involve showing that the transferor had legal advice, but that itself that will not always be sufficient.

In this case the solicitor who dealt with the transfer gave evidence that in the meetings he had with Neville there had been no indication that Neville was under pressure from Bradley – indeed he seemed very willing to make the transfer. However the solicitor still had concerns about it and had advised Neville against the transfer. However he had not been aware that Neville was still living in the house – he understood that Neville was living with Bradley. If he had realised Neville was giving up his home then he acknowledged he would have given more robust advice.

The judge found that Bradley had told a number of lies at various times, including that Neville was living with him in Swindon and that the St Albans property was unoccupied. It is clear that the judge found Bradley to be an untrustworthy witness.

Neville was found by the judge to be vulnerable and frail at the time he gave evidence, and that it was likely that he had had a fragile, anxious and eccentric personality for some years prior to the transfer. The judge also considered that Neville trusted and looked to Bradley for support; in particular he trusted Bradley to allow him and Linda to remain living in the property. The transaction could not be explained by tax reasons, to prevent Linda’s children inheriting the property or to avoid care home fees, as Bradley now claimed. The transfer would not be effective for IHT purposes because Neville continued to live there; Linda and Neville were not married and such inheritance matters could be dealt with by an appropriate Will; and Neville was in good physical health with no concerns about his care. In any event, none of these reasons had been mentioned to the solicitor at the time of the transfer.

Despite the fact that there was no evidence that Bradley had explicitly put pressure on his father, he could not refute the presumption which arose from the trust his father put in him and the unexplained transfer. The fact that there had been legal advice was not enough to demonstrate that Neville made the transfer independently in full knowledge and understanding of the circumstances. The transfer was therefore set aside.

The idea of undue influence conjures up images of an individual putting pressure on a vulnerable person or exerting control over them for financial advantage. However it can be much more subtle than that and the judge noted that this was not one of those overt cases. Where there is a relationship of trust and confidence, the recipient of a gift might not have deliberately taken advantage of the donor, and the donor may seem very keen to make the gift. The question of undue influence often arises where one person is caring for another – the person cared for has a genuine desire to be generous to their carer. However the courts recognise that these cases are very fact sensitive: what might negate the influence which arises from a relationship of trust in one set of circumstances might not do so for a different individual. The fact that legal advice has been given will not necessarily be enough. The law operates to protect the vulnerable and there is a high hurdle for the recipient to prove the gift was made free of influence.

The property in this case comprised well over half of Neville’s total assets and the transfer of it to Bradley could have left him and his partner homeless and having to spend his other capital on housing and living costs. It is only right that where the transfer is significant, the court will carefully scrutinise it to ensure that it was made free from undue influence and will look at the specific facts of each individual case.

Find out more about challenging a lifetime gift

Published: 11 December 2019


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