Brown v Stephenson

An elderly businesswoman, Mrs Brown, sought to set aside various land transfers and a declaration of trust on the grounds of undue influence. She owned a smallholding of 11 acres from which she sold goat produce.

In August 2001, Brown entered into a partnership with the defendant, Mr Stephenson, to convert a barn on the land into a house. In consideration of the development work, Stephenson would become a 50 per cent owner in the land and the business. The land was valued at £45,000 and it was agreed that Stephenson's contribution would be to carry out works to the value of £22,500.

In 2003, Brown signed a declaration of trust under which she was stated to hold the land on trust for herself and Stephenson as legal and beneficial joint tenants. The land was also transferred into joint names. The following year, Stephenson became concerned about Brown's financial problems and the risk that her creditors might seek to enforce her debts against the land.

Brown contended that the declaration of trust and transfers were signed because of the undue influence of Stephenson, who had been aggressive towards her and was aware of her dyslexia, and medical and financial problems. Following the principles laid out in RBS v Etridge[2002] 2 AC 773, the court rejected her claim.

There was no evidence in 2003 of pressure placed on Brown: she had freely admitted that she and Stephenson were then on good terms. The court was also not satisfied that Brown's medical problems affected her decision to sign the transfers. The witness to the documents had not noticed any problems with her health and had, in fact, thought she was a "fit woman".

Strained relations

Relations between the parties were more strained by 2005, although their conversations about Brown's debts and protecting Stephenson's interests in the land did not amount to undue pressure on Brown.

The court was also not satisfied that the relationship between the parties gave rise to a presumption of undue influence. Brown was not "vulnerable". She was active, had commercial experience and was not reliant on Stephenson for her financial affairs.

While the partnership agreement may have favoured Stephenson in that he only had to do work worth £22,500 to gain a half interest in the land, this benefit was not so large.

In addition, Stephenson had acted to his detriment on the transfers for a number of years without any objection from Brown. He had spent substantial labour and money on converting the barn - much more than the £22,500 envisaged.

Having stood by while Stephenson carried out the work and spent the monies, Brown should not be allowed to set aside the 2003 declaration of trust or transfers. And, given the amount of work done by Stephenson on the barn and the creditor risk, there was a rational argument in 2005 for Brown transferring her half-shares in the two parcels of land to him.

Even if there was a presumption of undue influence, this was rebutted by the evidence of the advising solicitor, who demonstrated that the transfers were an exercise of free will as a result of full and informed thought.

The allegations of bullying were held to be uncorroborated. Further, even if they could be proved, the court was not satisfied that they amounted to "bullying behaviour" or that they in any way influenced Brown's decision to sign the documents.

See Brown v Stephenson [2013] EWHC 2531 (Ch)
 

Heather Viljoen is a solicitor at Michelmores

She writes regular case updates for Private Client Adviser