Regular

posted 16 Sep 2002 in Volume 7 Issue 5

Public law case digest

Doubts about the true status of solicitor and adequacy of understanding
National Westminster Bank PLC v Rashida Bibi Amin and Others
[2002] UKHL 9 28.2.02

In 1988, the defendant and her late husband had given a second legal charge over their property to the bank as security for their son's borrowings. Both the defendant and her husband were Ugandan Asians who spoke no English.

The bank had requested a solicitor to deal with the formalities prior to the execution of the charge to ensure the couple were fully aware of the terms and conditions of the charge. The bank received confirmation from the solicitor that he had explained the charge to the couple.

Possession proceedings were commenced by the bank and in defence, the defendant counterclaimed that her son had exerted undue influence over her and her husband and that the bank had constructive notice of this as the bank was aware that neither she nor her husband were able to read or write English and the solicitor had not explained the terms of the charge and was acting for the bank and not them.

HELD:

The solicitor's confirmation on its own was not sufficient reason to strike out the defence and counterclaim;
There was doubt about who the solicitor was acting for as there was no evidence of the couple instructing the solicitor and as such, the issue should be determined by a trial;
There was doubt as to whether the solicitor had given any explanation of the charge or one that they could have fully understood, given their lack of knowledge of English.

Another proprietary estoppel case Anthony Clifford Jennings v Arthur Thomas Rice and Others
[2002] EWCA Civ 159 22.2.02

Mrs Royle lived at Lawn House and died on 11 August 1997 aged 93. She died a widow without issue and intestate. Her estate was valued net at probate at £1.285 million. The claimant, Mr Jennings started to work for Mrs Royle in about 1970 as a gardener but as time went by he took on more responsibilities. In the late 1980s

Mrs Royle stopped paying Mr Jennings, but paid £2,000 toward the purchase of a property. From 1994 until her death, Mr Jennings spent nearly every night on a sofa in a sitting room at Lawn House to give Mrs Royle the security she needed and ensure she could continue to live in her home. He provided personal care and continued to run errands and work in the garden. He did all these things out of compassion and because Mrs Royle had assured him that she would see him right. On the appeal Mr Jennings argued that:

The expectation induced in him by Mrs Royle was that he would receive the whole of her estate or at least the house and contents worth £435,000;
In the circumstances the judge had erred in holding that a payment of £200,000 was sufficient to satisfy the equity in his favour.

HELD:

It was not held by the judge that the entire estate had been promised to Mr Jennings. It had been found by the judge that Mrs Royle had promised that: “This will all be yours”, by the word “this” and the judge must have been referring to the property alone as it was established that Mr Jennings was unaware of what other assets, apart from the house and contents, that Mrs Royle had owned. He could not have expected to have received any more than this;
Once the doctrine of proprietary estoppel had been established, the value of the equity to be satisfied depended on the circumstances, including the expectation and the detriment. The judge had to do justice and so there must be proportion between the expectation and the detriment;
The judge was right to look at the expectation, the detriment and Mr Jennings's financial position and the amount available and his conclusion was one in which the court could not interfere.

Solicitor's duty of care to elderly person with uncertain memory
Finsbury Park Mortgage Funding Ltd v Ronald Burrows and Pegram Heron
Brighton County Court 22.2.02 and 13.3.02

Mr Burrows, an elderly gentleman, took out a mortgage of over £55,000 on his house, which was worth £70,000. He could clearly not afford to meet the repayments and was at risk of losing his home. The money was taken off Mr Burrows by a confidence trickster and as a result Mr Burrow was about to lose his home. Pegram Heron solicitors acted for both Mr Burrows and the mortgage company. Mr Burrows claimed that the solicitors fell short of the duty of care owed by a solicitor when acting for the mortgagor and mortgagee.

HELD:

It should have been obvious to the solicitor that he was dealing with an elderly man who might need treating with a little care. In light of Mr Burrows’s age, common sense required any professional to make sure that the person they were dealing with understood what they were doing. It should have been clear that Mr Burrows did not need or want a mortgage and could not afford it and the solicitor should have known to make more enquiries and offer advice;
The solicitor also owed a separate and enhanced duty of care to the mortgage lender. If the solicitor had done his duty by the lender property, facts would have emerged which would have enhanced his duty to Mr Burrows;
As a result of the breach of duty of care, Mr Burrows had entered into a transaction, which he could not afford. He should be relived of it and put back into the position in which he was before.

The second aspect of this case deals with the questions of quantum arising from the initial decision.

HELD:

Had the solicitor checked the mortgage proposal agreement the true situation would have been immediately apparent;
It was patently obvious that as soon as the money was advanced it would have been paid out again;
The solicitors were liable to put Mr Burrows in the position he would have been in had the mortgage not been advanced to him. He took on unwanted obligations and was allowed to act as a conduit for monies, which were essential if he was to repay the mortgage he was taking out. The events were totally foreseeable;
The lenders' costs of possession were also to be added;
Mr Burrows's costs of the lenders' claim was also added;
The cost of Mr Burrows's counter claim against the lenders and the wasted costs order sought by the lenders' solicitors against Mr Burrows was not recoverable from the solicitors;
The solicitors should give an indemnity to Mr Burrows against any costs of the broker that he may be ordered to pay.

Purpose did not have to be the dominant purpose but a substantial purpose
IRC v Mohammed Akram Hashmi (Executor of the estate of Musmil Gari deceased (1) and Omar Ghauri (2) CA 3.5.02

This was an appeal of an earlier case on the grounds there were insufficient evidence for the judge to infer that the motive was to put the property out of reach of creditors.

The history

The Revenue had sought a declaration that a trust deed dated 20 February 1989, whereby the deceased had transferred his beneficial interest in the property to his son Omar, when his son was only 16 years of age, was void under s423 Insolvency Act as a transaction defrauding creditors and could therefore be set aside.

The deceased had been trading from the property as an Indian restaurant, when he purchased the freehold, at the same time as completion he entered into the trust deed.

The deceased died in July 1997 and his estate was partially insolvent. The deceased had purchased various properties out of business profits that he had not declared to the Revenue, hence their interest in his estate. There was evidence that the deceased had wanted to provide for his son but there was no direct evidence that the deed was to put the property beyond the reach of creditors. However, from the Revenue's investigation

into the deceased's entire businesses it could be inferred that putting the asset beyond creditors reach was one of the purposes.

The Court had held that the deceased was aware that the transaction put the property beyond creditors reach. The motive to defeat creditors and the motive to provide for Omar co-existed. There was no overwhelming evidence that the deceased intended to benefit Omar at the date of the Trust deed and therefore the dominant purpose was to ensure the asset was not part of his estate. As such the transaction was to be set aside.

HELD ON APPEAL:

The judge had recognised that there was uncertainty about whether it was necessary for the court to decide whether the deceased's motive to put the assets beyond his creditors was his dominant motive;
Case law referred to established that the statutory purpose that had to be proved was predominant and substantial, if not the dominant purpose. Purpose did not need to be the sole purpose of the transaction;
To establish the statutory purpose under s423 (3) of the Insolvency Act 1986, the purpose had to be a real and substantial purpose and not simply a by-product of the transaction. It did not have to be proved that the purpose was a dominant one. The issue for the court was whether it could be established that the purpose behind the transaction was a substantial purpose to escape the debtor’s liabilities. Purpose cannot be inferred where it is shown that the debtor would have entered into the transaction in any event;
There was not sufficient evidence to justify the finding that the purpose in this case was the dominant purpose, but there was evidence to infer that the debtor’s purpose of the transaction was sufficient to uphold the judge’s decision that the purpose was to put the asset out of the reach of his creditors.

Undue influence used in gifts amounting to 91.6 per cent of cash assets.
Margaret Betina Hammond v Susan Osborne and others
[2002] EWCA Civ 885 27.6.02

Denis Pritler, a bachelor and retired teacher aged 72, met one of the defendants, Susan Osborne, after she found Mr Pritler struggling to get home. They both lived in the same road. Mrs Osborne and her husband took Mr Pritler under their wings and would help him with his shopping, visit and sit and have meals with him. In July 1998, Mr Pritler was found at home having had a fall. He had been there for two days. Throughout his three months in hospital Mrs Osborne was a regular visitor.

On his discharge, Mrs Osborne agreed to bring him two meals a day and at the suggestion of the care coordinator, she was added as a third party to his bank account to enable payment of day-to-day bills.

In September 1999, after Mr Pritler had suffered another fall, he told Mrs Osborne he wanted to make her a gift. Over a period of 16 days, four cheques were issued, all written by the defendant but other than the last one, signed by Mr Pritler, totaling £297,005. A month later Mr Pritler died intestate, leaving the claimant, his cousins who acted as Administrators to his estate. They contended that Mr Pritler had only intended to transfer investments to Mrs Osborne for safekeeping and for easier management or the gifts were the result of presumed undue influence.

It was accepted that there was a relationship of trust and confidence and the only issue for the court was whether the gift was made with full, free and informed choice.

HELD:

It was clear from evidence that Mr Pritler had not transferred the investments for her safekeeping but that he had intended it to be a gift;
However, Mr Pritler had not been told of the magnitude of the gifts, both in absolute and comparative terms and had not received independent advice in relation to the wisdom of the gifts and as such it could not be said that the gifts were made after free full and informed thought. Mrs Osborne had failed to rebut the presumption of undue influence.

Another case of undue influence
The estate of Elizabeth Lackschewitz-Martin v Dominic Lackschewitz-Martin and Robabeh Lackschewitz-Martin
Ch D 29.5.02 LTL 13.6.02

Yet another case of undue influence concerning a 90-year old lady who transferred ownership of two adjoining cottages, the garden and some land attached to her son and daughter in law. One of the cottages had been occupied by the son in the past. The administrator of the estate intended that the deceased had expressed the wish that each of her children would have a cottage each and half of the garden land.

HELD:

On the evidence, the court were satisfied that the son had exercised undue influence over his mother in relation to the transfers.

Mental capacity to refuse treatment
Re: W (Adult: refusal of medical treatment)
FAM 24.4.02 LTL2.7.02

W was a prisoner serving a life sentence for murder and a concurrent sentence of eight years for aiding and abetting suicide. He suffered from a severe psychiatric disorder. W had embarked on a campaign to force the prison authorities to have him treated in a special hospital, which they felt was not a viable option for his treatment. In December 2001, he cut open his lower right leg and prevented its healing by forcing various objects into it.

All three psychiatrists reported that W was not suffering from a mental illness, mental impairment or severe mental impairment but was suffering from a psychopathic disorder that did not impair his mental capacity to balance the information needed to reach a decision about his state of health. The doctors felt W understood that without treatment, his wounds would possibly become septicaemic, which could result in his death. This was notwithstanding he had made treats on his own life, which they felt were not really intended but to manipulate the authorities further.

W applied to the High Court for a declaration that he had mental capacity to refuse medical treatment.

HELD:

A mentally-competent patient has an absolute right to refuse to consent to medical treatment for any reason, rational or irrational or for no reason at all, even if the decision brings about his death. (Re MB (Medical Treatment) [1997] 2FLR 426);
If the person was rendered unable to make a decision as to whether to consent or refuse treatment through some impermanent or disturbance of mental function then he lacked capacity;
In such cases, inability to make a decision would occur when the person was unable to comprehend and retain information, which was material to the decision, in particular the consequences of refusing or consenting to treatment and if the patient was unable to use and balance the information as part of arriving at the decision. (Re C (Adult: Refusal of Treatment) [1994] 1WLR 290);
The evidence was overwhelming from the psychiatrists that W had mental capacity. There was no substantial evidence to balance against the psychiatrists. As such, it was held that W had capacity to choose to refuse or consent to treatment at any stage, and that he had the mental capacity to refuse treatment or resuscitation in the future, even if at that point he was without mental capacity to make that decision.

Public law case digest compiled by Caroline Bielanska, solicitor, TEP, and freelance consultant. She can be contacted at caroline.bielanska@ntlworld.com.