Macklin v Dowsett [2004] EWCA Civ 904
Undue influence; option agreement; elements of undue influence
Facts
Dowsett was in a dire financial situation. He had a bungalow that was condemned by the local authority. He was able to obtain planning for the building of a new bungalow in the old one’s place – however, construction had to commence within 5 years of the issue of the planning permission. Some time later, the demolition was carried out on his old bungalow, following which he lived in a caravan. Acting upon legal advice, Dowsett eventually sold his land to the Macklins upon the condition that he could continue to live there rent-free until the end of his life. Shortly before its expiry, the Macklins started preliminary works in order to save the planning permission. Dowsett entered into an option agreement under which the Macklins could require him to surrender his rent-free life tenancy for £5,000 if he did not complete the new bungalow within three years. The earlier agreement had imposed no obligation to build it.
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Issues
Dowsett claimed that he had financial problems as a consequence of which he was in a significantly weaker bargaining position than the Macklins. The Macklins were aware of his situation so Dowsett could have easily been exploited. The first instance judge rejected Dowsett’s view.
Decision/Outcome
The Court of Appeal allowed Dowsett’s appeal. Applying Royal Bank of Scotland v Etridge (No 2) [2001] UKHL 44, it held that he had established both requirements for a prima facie case of undue influence: a relationship of trust and confidence or ascendancy and dependency, and a transaction not readily explicable by that relationship. This shifted the evidential burden to the Macklins to provide a satisfactory explanation. Neither misconduct nor manifest disadvantage was a necessary ingredient.
The court found ascendancy and dependency in the particular circumstances immediately before the option agreement: Dowsett could not afford to preserve the planning permission, and the Macklins knew of that vulnerability. The option called for explanation because it exposed him to losing his existing life tenancy for £5,000 if he failed to complete a building he lacked the means to construct. The deputy judge had applied the wrong test by treating “manifest disadvantage” as the second requirement. His decision enforcing the option could not stand.
