Property prices are booming, and farming estates are no exception.
Possibly as a result of this, and combined with often complex farm management and ownership structures, the number of undue influence (UI) claims being brought against farming estates has also risen.
Therefore, UI is an increasingly important consideration for anyone with an interest in farms to consider, whether you own the farm, are a child or dependent, or a third party close to the owner.
This article looks at UI, uses case examples to illustrate how it can work, and considers some important practical steps to mitigate against the risk of a claim.
What is UI?
agriculture partner, Thrings
In a nutshell, UI is persuading someone to do something against their will, such as gifting farmland to another person when the person making the gift doesn’t really want to or doesn’t understand what is going on.
If such a gift can be shown to have been made because of UI, the gift can be set aside.
One of the leading cases concerning UI (Royal Bank of Scotland v Etridge) helpfully set out the circumstances in which it arises: “where there exists a relationship between two people involving on the one hand trust, confidence, reliance, dependence or vulnerability and on the other, ascendancy, domination or control”.
How does undue influence happen?
However, UI often happens behind closed doors without any knowledge or suspicion until after the gift or agreement is executed.
The hypothetical scenario set out below illustrates this:
Mr and Mrs A, owners of a mixed family farm, both created wills in favour of one another.
The wills stated following their deaths, their assets would be distributed equally between their three sons, B, C and D.
Mrs A struggled with many long-term health issues.
She was physically and mentally vulnerable, and her situation worsened when Mr A died.
Unexpectedly, son B (who was bankrupt) then moved into the farmhouse with his mother, despite the fact he had lived away from the farm and never shown any interest in his parents.
A few years later, sons C and D were shocked to learn Mrs A had transferred the farm to son B at no cost. They were naturally surprised as they had been expecting to inherit the farm with son B in three equal shares.
They were also surprised their mother had made the transfer of the farm to son B of her own free will, and concluded son B had pressurised her to do so. This could be UI.
UI is often not apparent until an event (such as execution of a will) has occurred, which can be years down the line.
This makes proving that someone was unduly influenced much harder.
The law on UI and different parties’ rights
A contract or gift, such as the one made by Mrs A to son B, will only be set aside because of UI if the person asking for it to be set aside can prove UI has been exercised.
In some cases, this can be done by actual proof of UI. In this example, it would need to be proved son B exerted UI on Mrs A to gift him the farm.
It would be helpful if someone had witnessed the UI taking place (for example, son B verbally or physically bullying Mrs A, or telling her things that were not true in order to influence her).
In other cases, there may be a presumption UI has been exercised if it can be shown that:
- there is a relationship between the parties in which the person being unduly influenced placed trust and confidence in the person committing the UI (such as Mrs A placing trust and confidence in son B), and
- the transaction entered into is one which “calls for explanation”. In other words, a transaction or gift that cannot be explained by ordinary motives.
The problem with scenario b is Mrs A’s gift to son B arguably does not, on the face of it, call for an explanation because it could be considered common for a mother to gift something to a son. Therefore, there may not be a presumption of UI and instead, actual UI may need to be proved.
Importantly, merely the existence of some influence is insufficient and the influence must be such that the person being influenced must have been “overcome by an intolerable pressure”.
There is no simple rule, and what needs to be proved depends on the relationship between the parties.
The rationale behind these tests is to provide freedom for a person to be able to gift or pass assets as they choose.
Therefore the law tries to tread a steady line between, on the one hand, trying to protect people’s freedom to make gifts as they wish, and seeking to protect people in Mrs A’s position where UI is suspected to have occurred on the other.
How to protect against undue influence
Can I protect myself against undue influence claims if I want to make a gift or protect my will from being challenged?
- Engage in open discussions with all family members about your desire for the distribution of your estate. If family members are excluded, explain why, for example, if one child is inheriting the farm because they have worked on it their whole life.
- If you do not feel comfortable doing that, explain the reasons for your will within it. Alternatively, ensure your solicitor makes a note of the reasons for the contents of your will.
- You should document gifts, explaining why they are given. Ideally get these documents witnessed by someone outside the family.
- Be cautious of estate planning – if someone chooses a lawyer for you, takes you to the solicitor’s office and sits in on appointments, this can be used as evidence of UI.
- Consider appointing a lasting power of attorney (LPA). This allows someone you trust to make financial decisions on your behalf if you suffer an accident or illness which causes you to lack the necessary capacity at a later stage.
My parent is being subjected to UI – what can I do?
Challenging an individual over whether they still maintain their free will can be an awkward conversation. However, there are steps which can minimise the effects of UI:
- Have open discussions. Alert the individual to the fact they may be being influenced. Likewise, the third party may not even be aware they are exercising UI
- Highlight your concerns to the relevant solicitor, putting them on notice in the event your parent attempts to alter their will
- If you suspect someone lacks capacity, you may be able to become their deputy and make important decisions on their behalf.
What should I do if I think I have a case for UI?
Due to close family relations, it is often difficult to decide whether to pursue a claim for UI. Account should be taken of the potential risk of family breakdown, the size of the estate and whether a claim is worth the costs and the actual chances of success.
Establishing a claim’s chance of success involves considering the evidence available. Although not exhaustive, useful evidence includes:
- Medical records regarding capacity and vulnerability. These can be released to you if the individual consents.
- Obtaining evidence from the solicitor who drafted the will. Did anyone attend the appointment with the individual?
- Obtaining previous wills. Has the will been substantially changed in someone’s favour? As in one case, previous wills may contain comments from a third party suspected of UI, thereby reducing their credibility.
What if a claim of UI is unsuccessful?
Importantly, there are other ways of challenging the distribution of property. These include:
- Claiming lack of capacity This is useful where the individual lacks the capacity to make important decisions. Applications are made to the Court of Protection to be appointed as a deputy, giving standing to apply to have transactions or gifts set aside. Applications are usually made by close friends or relatives who have the knowledge to make financial decisions on the individual’s behalf.
- Claiming under the Inheritance (Provision for Family and Dependants) Act 1975 This is available where you were dependent on the deceased but received nothing from the estate. The courts can make an order for you to receive a benefit from the estate.
These tips cannot replace professional guidance and should not be relied upon as such. It is important to always seek independent legal advice.