Winifred Carroll and Mary Jane Carroll (plaintiffs) v Michelle Carroll (defendant).

Equity - Undue influence - Conveyance of property by father to son - Property the sole asset of father - Father elderly and in poor health - Presumption arising as between elderly father and his son - Whether sufficient evidence to rebut the presumption - Whether father had obtained in- dependent advice in relation to the conveyance.

Equity - Jurisdiction to set aside unconscionable transactions - Principles to be applied in the exercise of this jurisdiction.

Laches - Whether the plaintiffs disentitled to relief - Principles to be applied.

The High Court (before Mr Justice Shanley); judgment delivered 5 March 1998.

Where the presumption of undue influence exists as between the parties to a conveyance, the courts will intervene to set aside that conveyance where there was not evidence rebutting the presumption and such evidence may be that the donor had independent advice (whether legal advice or competent and honest lay advice). The courts will also interfere where a transaction is unconscionable in that there is an inequality between the parties, the transaction is at an undervalue and there was a lack of independent advice.

Mr Justice Shanley so held in setting aside the conveyance of a public house from an elderly and infirm father to his son, where that property was the sole asset and source of income for the father, without reserving for himself such rights as would protect him should his son fail to provide for him out of the property, and without any independent advice (whether legal or otherwise) as to the consequences for himself and for the other members of his family.

Paul Gallagher SC and Brian Speirin BL for the plaintiffs; John Hedigan SC, James Dwyer SC and David Hardiman BL for the defendant.

Mr Justice Shanley outlined the facts. The plaintiffs were seeking to set aside a conveyance on the grounds that it was procured by undue influence and was in itself an improvident transaction. The property the subject matter of the conveyance was a public house with residential accommodation. By conveyance dated 3 May 1990, Thomas Carroll Senior conveyed the property to his son Thomas Carroll Junior in consideration of natural love and affection. A right of residence in favour of the grantor was reserved. Both parties to the conveyance were now deceased and the plaintiffs were the personal representatives of Thomas Carroll Senior and the defendant was the personal representative of Thomas Carroll Junior. The plaintiffs were the daughters of Thomas Carroll Senior. The defendant was the wife of Thomas Carroll Junior.

The public house was run by the plaintiffs' mother during her lifetime. The evidence was that the plaintiffs had spent some time away from home for reasons connected with education and work, and for personal reasons, but that they continued to make an active contribution to the running of the public house after leaving home, particularly at weekends and after their mother's death. Thomas Carroll Junior had devoted his energies to farming with his uncles and had acquired legal interests in their farms in return for his work. After his mother's death, he became more involved with the public house and sought the plaintiffs' assistance in persuading his father to sign the business over to him. The plaintiffs believed that their parents intended to treat their three children equally in terms of such assets as they had and neither of them had any belief that their father had intended to transfer any ownership in the property in question to their brother. They believed that they would have known of such an intention. While there had been some discussion of a need to transfer the business into Thomas Carroll Junior's name for tax reasons, as £20,000 was owed to the Revenue Commissioners in relation to VAT arrears, the plaintiffs understood that only the responsibility for the running of the business was to be transferred and that their brother was not acquiring any property interest in the premises. They did not suggest that their brother in any way cajoled or bullied their father into transferring the property to him.

Mr Justice Shanley said that Mr Carroll Senior was devastated by his wife's death and suffered from severe arthritis and had a heart complaint. As a result he was dependent on his children to do things for him, but there was no suggestion that his mind was in any way impaired.

The solicitor involved in the transaction, Mr Joyce, gave evidence that Mr Carroll Senior understood the nature of the transaction and that he did not wish to retain a right to be maintained and supported out of the premises. Mr Justice Shanley said that Mr Joyce seemed to be unsure as to who he was acting for. All of the correspondence was addressed to Mr Carroll Junior and there was no doubt that subsequent to the conveyance he was acting for Mr Carroll Junior. His position was most probably that of a family solicitor who was, in fact, acting for both the transferor and the transferee of the property. Mr Joyce had agreed that he did not inform himself as to the other assets of Mr Carroll Senior or his close relationship with his children. Nor did he advise Mr Carroll Senior as to the consequences of the conveyance, which transferred all of his assets to his son, should his son fail to support him or predecease him.

The plaintiffs had submitted that the relationship between the donor and the donee was such as to raise a presumption of undue influence which could only be rebutted by evidence that the donor acted of his own free will. The court could only be so satisfied where there was evidence that the donor received independent advice, both legal and otherwise, as to the consequences of his acts. They further submitted that even if no such presumption arose, there was actual evidence of undue influence arising out of the circumstances at the date of the deed. The donor was in poor health and was entirely dependent on his son for his needs. He had had no independent advice in relation to the transaction and its consequences for himself and for his daughters. Furthermore the conveyance was entirely at odds with his stated intention in relation to the property, i.e. that his daughters would always have a home there.

In any event, the plaintiffs submitted that the transaction should be set aside on the grounds that it was improvident in that the donor made no provision for his own maintenance and support.

The defendant conceded that the relationship between the donor and donee did give rise to a presumption of undue influence but the evidence was such as to establish as a matter of probability that the transaction was the result of the free exercise of the will of the deceased and in consequence the presumption was rebutted. She contended that Mr Carroll Senior had provided for his daughters out of a deposit account. It was further submitted that the plaintiffs were guilty of laches in that the plaintiffs were first aware of the deed in May 1990 and had allowed the defendant to expend money on the property. Furthermore, the defendant submitted that the conveyance was not improvident in that it provided for a right of residence for the donor and was made in contemplation of the donee assuming the business liabilities of the donor to the Revenue Commissioners.

Mr Justice Shanley said that the legal principles were as follows.

(1) The courts will set aside transactions where there has been undue influence exercised upon the donor or transferor of property. A presumption of undue influence may be raised as a result of the relationship between the parties to the transaction or the exercise of undue influence may be established on the evidence. The courts will intervene in the former situation on the grounds of public policy and to protect the relations which existed between the parties and prevent the influence arising thereunder being abused; they will intervene in the latter situation on the principle that no one should be allowed to retain any benefit arising from his own fraud or wrongful act: see Mr Justice Costello in O'Flanagan v Ray-Jer Limited ( High Court, unreported, 28 April 1983), adopting the principles formulated by Lord Justice Cotton in Allcard v Skin- ner (1887) 36 Ch D 145 at 171. The categories of relationship which will give rise to the presumption are never closed: see Mr Justice Budd in Gregg v Kidd [1956] IR 183. Where the presumption exists it may be rebutted by evidence which established on the balance of probabilities that the transaction was the consequence of the exercise of the donor of his own free will and not the result of undue influence. Such evidence may be evidence that the donor and independent legal advice, or competent and honest lay advice: see the comments of Lord Hailsham in Inche Noriah v Shaik Allie Bin Omar [1929] AC 127 at 135.

(2) Where the relationship does not give rise to such a presumption then the burden of proof is on the person seeking to establish undue influence.

(3) Apart from the courts' jurisdiction to set aside a transaction on the grounds of undue influence, there is also a jurisdiction to set aside as unconscionable other transactions where the parties to the transaction have unequal bargaining positions and the weaker party has not been adequately protected. This jurisdiction will only be exercised where it is established: first, that one party was at a serious disadvantage to the other by reason of poverty, ignorance or otherwise, so that circumstances existed of which unfair advantage could be taken; secondly, that the transaction was at an undervalue; and thirdly, that there was a lack of independent legal advice. (See Hanbury and Martin: Modern Equity, 14th edition (London, 1993) at page 821.) The jurisdiction was recognised in Grealish v Murphy [1946] IR 35.

(4) In order to disentitle a plaintiff to relief, the delay must be such as to have given rise to an inference that the plaintiff had acquiesced in the infringements of the rights he now asserts, and the delay must also be of such a nature as to have caused some detriment to the defendant. (See Keane: Equity and the Law of Trusts in Ireland (London and Edinburgh, 1988) at paragraph 17.16.)

The value of the property in question was between £100,000 and £125,000 and represented the only real asset of Thomas Carroll Senior. The transaction was one from father to son. Mr Justice Shanley said that he was satisfied that the significant benefit obtained by the donee form the transaction and the relationship between donor and donee were such as to raise a presumption of undue influence.

Furthermore, the defendant had not established as a matter of probability that the transaction was the result of the free exercise of the donor's will such as to rebut the presumption. Mr Joyce had acted as the family solicitor and had not discussed with Mr Carroll Senior the fact that he was disposing of his only real asset without reserving any protection for his future. Nor was Mr Joyce aware of the family's circumstances as regards the position of the other members of the family, the totality of the assets held by the family members or the assurances given by the donor to other members of the family as to their user of the premises during their lifetimes. While there was no real dispute that the donor was mentally alert at the date of the transfer, he did not have the necessary independent advice (whether it was that of a legal adviser or a competent and qualified lay person) such as would establish that the transaction was made of his own free will. The family was a close knit one and the failure of the plaintiffs' father to disclose the actual transfer of the property to their brother (as opposed to the running of the business) was not an act of concealment; it was more likely that Mr Carroll Senior did not truly understand the nature and effect of the deed. The Plaintiffs did not know of the conveyance until told of it by Mr Joyce in 1994 after the death of their brother. In fact there was no-one save the defendant who claimed to know the true effect of the transaction during the lifetime of the donor. Mr Justice Shanley said that all of those matters strengthened him in the view that the presumption had not been rebutted by evidence which established as a matter of probability that the transfer was the result of the exercise of free will of the donor.

The transaction should also be set aside on the grounds that it was an improvident transaction. There were few donors who more deserve the protection of equity than did the donor in this case in that few parties would have come to a transaction on more unequal terms that did the donor in relation to his son.

Mr Justice Shanley said that there was no real substance to the allegation of laches as the plaintiffs had become aware of the real nature of the transaction in early 1994 and by November of that year the proceedings which were ultimately issued had been threatened. There was nothing in the correspondence between the parties to lead the defendant to believe that the plaintiffs had abandoned their claim to the premises.

Solicitors: Ivor Fitzpatrick & Company (Dublin) for the plaintiffs; Philip M. Joyce & Co (Killenaule) for the defendant.