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delivered: MAF IP 1 Friday, 14 December, 2012 at 21:43 HKT Cases Liles v Terry Current Document 1

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*679 Liles v Terry and Wife.

Court of Appeal 7 November 1895

[1895] 2 Q.B. 679

Lord Esher M.R., Lopes L.J. and Kay L.J. 1895 Nov. 7. Solicitor and ClientGift ClientPresumption of Undue InfluenceAbsence of Independent Advice. The client of a solicitor, without independent advice, made a voluntary conveyance to him of leasehold premises in trust for herself for life, and after her death in trust for his wife, who was her niece, for her separate use absolutely: Held, that, the well-settled rule of equity being that such a gift could not be supported, unless the donor had competent and independent advice in making it, the conveyance must be declared void. APPEAL from the judgment of Charles J. without a jury. The action was brought to set aside a deed dated October 18, 1892, and made between the plaintiff Jane Liles of the one part, and John Frederick Terry (the male defendant) of the other part, whereby the plaintiff, in consideration of the natural love and affection she had towards Mary Rose Terry (the female defendant), assigned to the said J. F. Terry two leasehold houses in the parish of St. Mary, Newington, subject to the payment of the rent and performance of the covenants under the lease, in trust to pay the rents and profits to the plaintiff during her life, and after her death to her sister Frances Hogg, widow (who had died before the action was brought), during her life, and after her death upon trust for the said Mary Rose Terry for her separate use and benefit absolutely. The facts were as follows. The male defendant was a solicitor. The female defendant was his wife and the niece of the plaintiff. It appeared that the plaintiff, who was a spinster of about seventy-seven years of age, had been engaged in litigation with respect to property of which the houses assigned by the deed in question formed part, and had said that she would leave the houses by will to Mrs. Hogg, the female defendant's mother, for life, and after her death to the female defendant, if the male defendant would act as her solicitor in the matter without making any charge, and he had *680 accordingly so acted. Subsequently the plaintiff saw the male defendant and told him that she desired to make her will. On October 18, 1892, she went to a boarding-house in London, at which the male defendant was then staying, for the purpose of executing her will. The defendant then produced a will which he had caused to be prepared, and she executed it. By this will, which did not mention the houses in question, the plaintiff, after bequeathing certain legacies, devised and bequeathed the residue of her real and personal property to her four nieces. The male defendant then produced the deed in question and asked her to sign it, which she did. She stated in her evidence that she asked what it was, and he told her that it was a separate deed for the two houses; and that she then said that she did not understand why it was not all in one paper. She further stated that she was not asked whether she would have independent professional advice in the matter, and that the deed was not read over or its contents explained to her, and that she was not told that the deed was irrevocable, and did not understand it to be so. On the other hand, a witness named Pearson, an architect, unconnected with the parties, who was staying at the boarding-house and was present when the deed was executed, was called for the defendants, and stated that the male defendant told the plaintiff that one of the documents which he had brought was a will, and the other a deed, and explained the effect of them to her, and that she then signed them and said she was glad the matter was settled. The male defendant was not able to give evidence at the trial on account of his mental condition. It was contended for the plaintiff at the trial that the deed was invalid, being a voluntary conveyance in favour of the wife of the assignor's solicitor; and further, that, even if it were not a voluntary conveyance, such a conveyance was invalid, the assignor not having had independent professional advice in making it. The learned judge came to the conclusion upon the evidence that there was nothing to shew any undue influence or unprofessional conduct on the part of the male defendant; that the plaintiff had had the matter thoroughly explained to her, and that her intention was to have it carried out by the deed she *681 executed. He held, on the authority of Price v. Jenkins 1, that the assignment was not voluntary, because it imposed on the assignee a liability in respect of the rent of the premises and the covenants in the lease; and that, there having been nothing in the nature of undue influence or deception, but the whole matter having been fully and fairly explained to the plaintiff, who, in the learned judge's opinion thoroughly understood what she was doing, and did it with the intention of benefiting her niece, the deed was not invalid. He therefore gave judgment for the defendants. C. L. Attenborough, for the plaintiff. The learned judge was wrong in treating this as not being a voluntary

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conveyance. The decision in Price v. Jenkins 2 has really no bearing on the present question. [KAY L.J. That case merely dealt with the question whether an assignment of leasehold property was a voluntary conveyance under 27 Eliz. c. 4.] That question is an entirely different one from the present. A conveyance for the present purpose is voluntary unless a full consideration is given, and it cannot be contended that the mere liability in respect of the rent and covenants is such a consideration. It is submitted that the result of the cases is that such a gift as this made to a solicitor by his client while the relation of solicitor and client subsists, and without the client having independent professional advice, is invalid: Huguenin v. Baseley 3; Hatch v. Hatch 4; Gibson v. Jeyes 5; Tyars v. Alsop 6; Morgan v. Minett. 7 The same rule applies to a gift by the client to the solicitor's wife: Goddard v. Carlisle. 8 The plaintiff here had no independent advice, and she stated that she did not know that she was executing an irrevocable assignment of the houses. The evidence did not shew that the effect of what she was doing was fully explained to the plaintiff; and the finding of the learned judge in this respect was not justified. It was the duty of the defendant to recommend her *682 to employ another solicitor. If she had had the advice of another solicitor, can it be doubted that he would have explained to her that, if she executed such a deed, it would be irrevocable? It is submitted that the effect of the authorities is that it is a hard and fast rule that such a gift cannot be valid unless the donor has independent professional advice: Goddard v. Carlisle 9; Rhodes v. Bate. 10 [He also cited Allcard v. Skinner. 11] Stephen Lynch, for the defendants. This gift does not come within the category of a gift made by a client to a solicitor. The cases in which a gift to a solicitor's wife by a client has been held void are cases where the Court saw that the solicitor was trying to get a benefit for himself through his wife. It is too wide a proposition to say that, because a woman happens to be the wife of a solicitor, she cannot take a gift from his client, particularly when she is the client's niece, and as such a person on whom the client might naturally be disposed to confer a benefit, apart from any influence arising from the relationship of solicitor and client. This was a gift to the female defendant for her separate use, and one from which the solicitor in point of law derived no benefit. The authorities do not shew that there is any hard and fast rule such as that contended for by the plaintiff. It is submitted that the true rule is that, if the transaction is a perfectly honest and straightforward one, it will hold good; but the onus lies on the solicitor of shewing that to be the case, and that he advised his client as fully and fairly as if he had been an independent solicitor. The learned judge's finding is to the effect that in this case that onus was sustained by the defendants. The observations of Lord Eldon in Hatch v. Hatch 12, and of Lord Brougham in Hunter v. Atkins 13, are inconsistent with the existence of such a hard and fast rule as is contended for by the plaintiff; and the judgment of Turner L.J. in Rhodes v. Bate 14 hardly shews that there is such a rule, but merely that the question whether the donor has had independent advice is a very material element in arriving at a conclusion *683 whether there was undue influence, and whether the transaction was entirely fair and straightforward. LORD ESHER M.R. In this case the question appears to me to be whether, by virtue of a definite rule of equity, the Court is bound to set aside this conveyance which has been executed by the plaintiff. I take the facts in truth to have been, and the learned judge appears to me to have found, that the plaintiff, when she signed this deed, intended to do so with the effect of making an assignment of this property in favour of her niece, the wife of the solicitor, and that she knew that she could not afterwards alter it and intended to bind herself irrevocably by it. I think the learned judge has found, and I believe it to be the truth, that the difference between a deed which would have that effect and a will which would be revocable was fairly and fully explained by the solicitor to her before she executed the deed, so that she did precisely what she intended to do, and that no undue influence whatever was exercised over her. Although that was the case, and although she executed the deed, as I believe, not with the intention of benefiting the solicitor, whom in point of law it did not benefit, but with the exclusive intention of benefiting her niece, yet, as I understand the doctrine laid down by the Courts of Equity on the subject, there is a positive rule of equity to the effect that, because the solicitor who acted in relation to the execution of the deed was the husband of the plaintiff's niece, and the plaintiff had not the advice of an independent solicitor, therefore the gift which the plaintiff intended to make for the benefit of her niece was invalid; or in other words, according to the authorities by which the rule of equity on the subject is determined, there is in such a case a legal presumption of undue influence by the solicitor which cannot be met or rebutted by any evidence. It appears to me that that is the rule on the subject which has been laid down in the cases to which we have been referred, such as Rhodes v. Bate. 15 I must submit to that rule. I own that I think it unfortunate that such a rule should have been laid down, because in particular instances it may work great injustice; and I do not think that a hard and fast rule which may work such injustice ought to be the rule of *684 law in the matter. But I feel bound by the authorities to hold that there is such a rule in equity. On that ground only, and believing the facts as found by the learned judge to be the truth of the matter, I think the female defendant must lose the benefit which the plaintiff, her aunt, intended to confer upon her, and this appeal must be allowed. LOPES L.J.

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I have come to the same conclusion. I am sorry to differ from any view expressed by the Master of the Rolls, but I must differ from his comment on the rule of equity on this subject. I cannot consider it an unfortunate rule. It appears to me to be a hard and fast rule which is founded on public policy. In exceptional cases it may possibly work hardship; but in the generality of cases it is in my opinion highly beneficial, and I should regret to see it altered. I think the cases establish the rule that such a gift as this made by a client to his solicitor, whilst the relation of solicitor and client or any influence arising from it exists, is invalid. The relation of solicitor and client must be entirely at an end before such a gift can be validly made. I do not think that evidence of any explanation by the solicitor of the document or any assistance given by him to enable the client to understand the effect of it is of any avail to prevent the application of this general rule. What the solicitor ought in such a case to do is to suggest to the client that in order to make the gift effectual the client should procure independent professional advice. I will not refer to the authorities that have been cited at length. The judgment of Turner L.J. in Rhodes v. Bate 16 seems to me to shew that the rule on the subject is inflexible. He says: I take it to be a well-established principle of this Court, that persons standing in a confidential relation towards others cannot entitle themselves to hold benefits which those others may have conferred upon them, unless they can shew to the satisfaction of the Court that the persons by whom the benefits have been conferred had competent and independent advice in conferring them. In the view I take it is unnecessary to discuss the effect of the evidence in this case. I am not prepared, however, to say that I should come to the same conclusion as the Master of the Rolls as to the *685 effect of it; but that is immaterial, because we are acting on the rule which I have mentioned. It appears to me clear from the cases that no distinction can be recognised between a gift made to a solicitor himself and one made to his wife. It is obvious that a solicitor might benefit largely by a gift to his wife, and there would be a similar temptation to exercise undue influence in respect of such a gift. The wife might make over the property to him the day after it had been given to her. For these reasons I think this appeal must be allowed. KAY L.J. I must say with deference that I cannot agree with the view expressed by the Master of the Rolls with regard to the rule of equity on this matter. It appears to me to be a rule of public policy of great importance that, while a person is under the influence or presumed influence of another person in consequence of a confidential relation between them, that other person cannot accept from him a gift of any kind, unless it is shewn to have been made with competent independent advice, which I take to mean independent advice of a professional nature. The rule on the subject is laid down by Lord Erskine in Wright v. Proud 17 thus: So, independently of all fraud, an attorney shall not take a gift from his client, while the relation subsists; though the transaction may be, not only free from fraud, but the most moral in its nature. Lord Eldon, dealing with the same subject in Hatch v. Hatch 18, says: This case proves the wisdom of the Court in saying, it is almost impossible in the course of the connection of guardian and ward, attorney and client, trustee and cestui que trust that a transaction shall stand purporting to be bounty for the execution of antecedent duty. It may be observed that there is a slight difference between these two statements of the rule. In the earlier case it is said that an attorney shall not take a gift from his client; whereas Lord Eldon says that it is almost impossible that the transaction shall stand. But what was said by Turner L.J. in Rhodes v. Bate 19 seems to explain this slight difference between the two statements. He there says that in the case of merely trifling gifts *686 the Court would not interfere to set them aside upon the mere fact of a confidential relation and the absence of proof of competent and independent advice. But with regard to all other gifts he lays it down as a strict rule that persons standing in a confidential relation towards others cannot entitle themselves to hold benefits which those others may have conferred upon them, unless they can shew to the satisfaction of the Court that the persons by whom the benefits have been conferred had competent and independent advice in conferring them. I cannot conceive a wiser rule than this, or one more calculated in most cases to ensure the observance of justice and equity between parties in such a confidential relation. It applies to the case of trustee and cestui que trust, to that of guardian and ward, and preeminently to that of a solicitor and his client, who is necessarily so much under the influence of his solicitor. A solicitor to whom such a gift is offered ought to know the rule on the subject; and, being of necessity in a position which renders him liable to so much suspicion, he ought to inform his client that he should not make such a gift without independent advice, and that the client should not carry out the matter through him as solicitor, but should go to another solicitor. If he chooses to act himself in the matter, I think there is an imperative rule that such a gift is invalid. In this case the gift was to the solicitor's wife, and not to the solicitor himself; but the decision of the Court of Exchequer in the case of Goddard v. Carlisle 20, which has never been disputed, lays it down that there is no difference for this purpose between a gift to a man's wife and one immediately to himself, if the gift to the wife be effected by undue influence on the part of the husband. The principle is that, while the confidential relation exists, it is impossible to rebut the presumption of undue influence unless the donor had competent and independent advice. This presumption exists as much when the gift is made to the wife as when it is made to the solicitor himself. I confess I do not take the same view of the evidence in this case as the Master of the Rolls. It appears that the plaintiff had given a previous intimation that, in consequence of work *687 having been done for her gratuitously by the solicitor, she intended to leave these houses to his wife - that is to say, to leave them by a will, which is a

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revocable instrument. All that such a statement would amount to is that her then present intention was to make that revocable instrument in favour of the solicitor's wife. Having instructed him to make a will, she has an interview with him for the purpose of signing the will; and he then brings forward a deed, which she had given him no instructions to draw, disposing of these houses in favour of his wife. The plaintiff says that she asked why one document would not do, and that she never understood that the deed was not a revocable instrument. The solicitor himself was at the time of the trial in a state of mind that precluded him from being called as a witness; but there was the evidence of another person who was present when the deed was executed. He was not a friend of the plaintiff, but merely happened to be present. He was called far the defendants. He did not say that the plaintiff was told that the deed would be irrevocable; all he said was that the deed was explained to her. If I had been the judge, I should have come to the conclusion that she never did know the difference in this respect between a deed and a will. I do not think it is to be presumed that this old lady had that knowledge, unless the matter was explained to her. All this took place when she went to sign a will; and I do not think it was clearly shewn that she understood the effect of what she was doing. I do not, however, base my judgment on any such consideration. Assuming that she did know what she was doing, I think the rule of equity is that under the circumstances she must be presumed to have been acting under undue influence. I do not think that the learned judge below in determining this case paid sufficient regard to the rule of equity which I have mentioned, and which I must say commands my strongest respect and approval. For these reasons I think this appeal should be allowed.

Representation
Solicitor for plaintiff: J. Attenborough. Solicitors for defendants: Wilson & Sons. Appeal allowed. (E. L.)
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 5 Ch. D. 619. 5 Ch. D. 619. 14 Ves. 273; 2 W. & T. L. C. 6th ed. p. 597. 9 Ves. 292. 6 Ves. 266. 61 L. T. 8. 6 Ch. D. 638. 9 Price, 169. 9 Price, 169. L. R. 1 Ch. 252. 36 Ch. D. 145. 9 Ves. 292. 3 My. & K. 113, at p. 135. L. R. 1 Ch. 252. L. R. 1 Ch. 252. L. R. 1 Ch. 252, at p. 257. 13 Ves. 136. 9 Ves. 292.

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19. 20.

L. R. 1 Ch. 252. 9 Price, 169.

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