Thompson v Foy

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Thompson v Foy
Royal Coat of Arms of the United Kingdom.svg
Court Chancery Division
Decided 20 May 2009
Citation(s) [2009] EWHC 1076 (Ch)
Case opinions
Lewison J
Keywords
Actual occupation, overriding interests, undue influence

Thompson v Foy [2009] EWHC 1076(Ch) (20 May 2009) is an English land law case concerning the right of a person with an overriding interest in a home and deals with a family arrangement for a house to be a gift transferring from a mother to a daughter and the trust between the two parties that the daughter would pay the mother her sum to buy out her share of the property.

English land law Law of real property in England and Wales

English land law is the law of real property in England and Wales. Because of its heavy historical and social significance, land is usually seen as the most important part of English property law. Ownership of land has its roots in the Anglo-Saxon system of Bookland and in the Anglo-Saxon multiple estate, a feudal system transformed by William the Conqueror and his influx of many new chief landlords after 1066. The modern law's sources derive from the old courts of common law and equity which includes legislation such as the Law of Property Act 1925, the Settled Land Act 1925, the Land Charges Act 1972, the Trusts of Land and Appointment of Trustees Act 1996 and the Land Registration Act 2002, and the European Convention on Human Rights. At its core, English land law involves the acquisition, content and priority of rights and obligations among people with interests in land. Having a property right in land, as opposed to a contractual or some other personal right, matters because it creates privileges over other people's claims, particularly if the land is sold on, the possessor goes insolvent, or when claiming various remedies, like specific performance, in court. Capital taxation, the industrial revolution and reform of the established church has resulted in a shift from predominant ownership by the church and landed gentry to largely agricultural, minority aristocratic ownership. This means today sites for development belong to a complex web of owners able meet market demand-side forces for development, tempered by supply-side forces including the values enshrined in public planning policy to protect green spaces and promote sustainable, locally diverse and socially useful development of land.

A gift, in the law of property, is the voluntary transfer of property from one person to another without full valuable consideration. In order for a gift to be legally effective, three requirements must be met:

  1. Intention of donor to give the gift to the donee
  2. Delivery of gift to donee.
  3. Acceptance of gift by donee.

Contents

Summary

"A claim to set aside a deed of family arrangement and deed of gift transferring a property from a mother to her daughter based on undue influence failed where the kind of trust in play between the parties was no more than a trust that a daughter would keep her promise to her mother to pay her a sum to buy out her share, and there had been no actual undue influence and the mother had accepted that she was taking a risk."

Undue influence in English law is a field of contract law and property law whereby a transaction may be set aside if it was procured by the influence exerted by one person on another, such that the transaction cannot "fairly be treated the expression of [that person's] free will".

Abstract

"In conjoined actions, the court was required to determine issues concerning ownership and beneficial interest in a property, and priority over a registered charge. In the first action, the claimant (T) was the mother of the defendant (F). T, who was a widow, had shared her property with F and her family, and allowed them to build a substantial self-contained extension to live in, paid for by F. T acknowledged that the extension belonged to F. F and her family subsequently expressed an interest in moving to Spain, taking T with them.

At that time, F did not have the money to fund the purchase of a Spanish property unless her part of the value of the property was realised. It was agreed that F would buy out T's share of the property for £200,000 and then mortgage the property and rent it out to cover the mortgage. T would then receive the £200,000 and F would use the excess to purchase a Spanish home. T lent F £20,000 to put a deposit on a Spanish property. F then applied for a buy-to-let mortgage from a company (X) which was the claimant in the second action, wrongly stating that she owned the property at that time. Following repeated requests for reassurance from F, T subsequently transferred the property to F via a deed of family arrangement and deed of gift.

She then decided that she no longer wanted to move to Spain, and began searching instead for her own bungalow. When the mortgage moneys were released to F by X, F informed T that she could not pay her the £200,000 because she had been advised that if T were to die within seven years she would have to pay inheritance tax on her part of the money. F offered T £60,000, with the remainder to be paid in seven years. A dispute then arose between T and F, as a result of which the property was not let out. In consequence, the mortgage was not paid and arrears amounted. X repossessed the property and obtained a money judgment against F.

T claimed to be entitled to set aside the documents by which F came to be registered as proprietor of the property and that her right to do so had priority over the registered charge because it was an overriding interest. It fell to be determined whether (i) F was entitled to any beneficial interest in the property, and the extent of any such interest; (ii) T was entitled to set aside the deed of family arrangements and deed of gift to F on the ground of undue influence; (iii) if T was so entitled, her right to do so was binding on X; (iv) F had repaid to T the sum lent to pay for the deposit on the Spanish property."

Judgment

F was entitled to a beneficial interest in the property based on proprietary estoppel. There had been a mutual understanding between T and F that if F built an extension it would belong to her. T had failed to establish that F had not acted in reliance on that representation, and F established her claim to ownership of the extension.

(2) Unacceptable conduct amounting to undue influence might arise out of a relationship between two persons where one had acquired over the other a measure of influence or ascendancy, of which the ascendant person took unfair advantage. Whether a transaction had been brought about by undue influence was a question of fact, Royal Bank of Scotland plc v Etridge (No 2) [2001] UKHL 44 , [2002] 2 AC 773 applied. On the evidence, there had not been a complete relationship of trust and confidence between T and F, as T had appreciated that she was taking a risk, although F had promised to pay T the £200,000. The kind of trust in play was no more than a trust that a daughter would keep her promise to her mother.

<i>Royal Bank of Scotland plc v Etridge (No 2)</i>

Royal Bank of Scotland plc v Etridge [2001] UKHL 44 is a leading case relevant for English land law and English contract law on the circumstances under which actual and presumed undue influence can be argued to vitiate consent to a contract.

No presumption of undue influence arose, therefore, and the burden was on T to prove that F had actually used undue influence to procure that the transaction went ahead. The fact that F's promise had been repeatedly and sincerely given did not amount to undue influence. Accordingly, the claim to set aside the deed of family arrangement and the gift of the legal title had to fail.

(3) Even if, contrary to that finding, T had been entitled to set aside the transaction on the ground of undue influence, that would not have affected the registered estate at the date of the charge in favour of X because the claim based on undue influence would not crystallise until F's misappropriation of the mortgage moneys and the equity would not arise until that time. (4) F had not repaid the £20,000 that T had lent to her and it was still owing.

Lewison J said the following [1]

See also

Land Registration Act 2002

The Land Registration Act 2002 is an Act of the Parliament of the United Kingdom which repealed and replaced previous legislation governing land registration, in particular the Land Registration Act 1925, which governed an earlier, though similar, system. The Act, together with the Land Registration Rules, regulates the role and practice of HM Land Registry.

A leasehold estate is an ownership of a temporary right to hold land or property in which a lessee or a tenant holds rights of real property by some form of title from a lessor or landlord. Although a tenant does hold rights to real property, a leasehold estate is typically considered personal property.

Equitable interest

An equitable interest is an "interest held by virtue of an equitable title or claimed on equitable grounds, such as the interest held by a trust beneficiary." The equitable interest is a right in equity that may be protected by an equitable remedy. This concept exists only in systems influenced by the common law tradition, such as New Zealand, England, Canada, Australia and the United States.

Related Research Articles

A mortgage is a security interest in real property held by a lender as a security for a debt, usually a loan of money. A mortgage in itself is not a debt, it is the lender's security for a debt. It is a transfer of an interest in land from the owner to the mortgage lender, on the condition that this interest will be returned to the owner when the terms of the mortgage have been satisfied or performed. In other words, the mortgage is a security for the loan that the lender makes to the borrower.

A deed is any legal instrument in writing which passes, affirms or confirms an interest, right, or property and that is signed, attested, delivered, and in some jurisdictions, sealed. It is commonly associated with transferring (conveyancing) title to property. The deed has a greater presumption of validity and is less rebuttable than an instrument signed by the party to the deed. A deed can be unilateral or bilateral. Deeds include conveyances, commissions, licenses, patents, diplomas, and conditionally powers of attorney if executed as deeds. The deed is the modern descendant of the medieval charter, and delivery is thought to symbolically replace the ancient ceremony of livery of seisin.

A due-on-sale clause is a clause in a loan or promissory note that stipulates that the full balance of the loan may be called due upon sale or transfer of ownership of the property used to secure the note. The lender has the right, but not the obligation, to call the note due in such a circumstance.

A resulting trust is the creation of an implied trust by operation of law, where property is transferred to someone who pays nothing for it; and then is implied to have held the property for benefit of another person. The trust property is said to "result" back to the transferor. In this instance, the word 'result' means "in the result, remains with", or something similar to "revert" except that in the result the beneficial interest is held on trust for the settlor. Not all trusts whose beneficiary is also the settlor can be called resulting trusts. In common law systems, the resulting trust refers to a subset of trusts which have such outcome; express trusts which stipulate that the settlor is to be the beneficiary are not normally considered resulting trusts.

Unconscionability

Unconscionability is a doctrine in contract law that describes terms that are so extremely unjust, or overwhelmingly one-sided in favor of the party who has the superior bargaining power, that they are contrary to good conscience. Typically, an unconscionable contract is held to be unenforceable because no reasonable or informed person would otherwise agree to it. The perpetrator of the conduct is not allowed to benefit, because the consideration offered is lacking, or is so obviously inadequate, that to enforce the contract would be unfair to the party seeking to escape the contract.

Inheritance Tax in the United Kingdom

In the United Kingdom, Inheritance Tax is a transfer tax. It was introduced with effect from 18 March 1986, replacing Capital Transfer Tax.

<i>Barclays Bank Ltd v Quistclose Investments Ltd</i>

Barclays Bank Ltd v Quistclose Investments Ltd[1968] UKHL 4 is a leading property, unjust enrichment and trusts case, which invented a new species of proprietary interest in English law. A "Quistclose trust" arises when an asset is given to somebody for a specific purpose and if, for whatever reason, the purpose for the transfer fails, the transferor may take back the asset.

A beneficial interest is "that right which a person has in a contract made with another" (third) person. The typical example is "if A makes a contract with B that A will pay C a certain sum of money, B has the legal interest in the contract, and C the beneficial interest."

<i>Gissing v Gissing</i>

Gissing v Gissing [1970] UKHL 3 is an English land law and trust law case dealing with constructive trusts arising in relationships between married couple. It may no longer represent good law, since the decisions of Stack v Dowden and Jones v Kernott.

Flagg v. Walker, 113 U.S. 659 (1885), regards a case where the deeds for several parcels of land were transferred from Flagg, who was in financial difficulty, to Walker in return for paying off Flagg's debts and profits from the sale against a mortgage for other property owned by Flagg.

The vast majority of states in the United States employ a system of recording legal instruments that affect the title of real estate as the exclusive means for publicly documenting land titles and interests. This system differs significantly from land registration systems, such as the Torrens system that have been adopted in a few states. The principal difference is that the recording system does not determine who owns the title or interest involved, which is ultimately determined through litigation in the courts. The system provides a framework for determining who the law will protect in relation to those titles and interests when a dispute arises.

<i>Barclays Bank plc v OBrien</i>

Barclays Bank plc v O’Brien[1993] UKHL 6 is an English contract law case relating to undue influence. It set out the basic categories of undue influence as,

<i>Errington v Wood</i>

Errington v Wood[1951] EWCA Civ 2 is an English contract law and English land law judicial decision of the Court of Appeal concerning agreement and the right to specific performance of an assurance that is relied on.

<i>Jones v Kernott</i>

Jones v Kernott [2011] UKSC 53 is a decision by the UK Supreme Court concerning the beneficial entitlement to a co-owned family home under a constructive trust. The court ruled there was a 90:10 split of ownership in favour of the main child-caring partner who contributed 80% of the equity to the home in which she lived. The non-resident partner had also ceased to pay bills and maintenance for the children for a considerable time.

Bristol & West Building Society v Henning [1985] EWCA Civ 6 is an English land law case that holds a person can consent to give up the right to an overriding interest in land, that will bind third parties, such as banks, that purchase a property. Although dealing with unregistered land, it is equally applicable in the case of registered land and now falls under the Land Registration Act 2002.

Midland Bank plc v Cooke [1995] is an English land law case, concerning constructive trusts; and at first instance proven undue influence in law as to a secured business loan and later refinance.

<i>CIBC Mortgages plc v Pitt</i>

CIBC Mortgages plc v Pitt[1993] UKHL 7 is a decision of the House of Lords relating to undue influence. The decision confirmed that a person did not need to suffer "manifest disadvantage" under a transaction in order to challenge it for actual undue influence.

References

  1. [2010] 1 P. & C.R. 16, 122