Hunt v Hunt [2005] EWHC 3525 (Ch)

Case No 1HC 429/05

[2005] EWHC 3525 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Venue Royal Courts of Justice

Date Thursday, 15 th December, 2005

Strand

London WC2A 2LL

Before

MR JUSTICE WARREN

Between

MICHAEL HUNTClaimant

-v-

Between

DAVID HUNTDefendant

Digital Transcript of Smith Bernal Wordwave Limited

PO Box 1336 Kingston-Upon-Thames Surrey KT1 1QT

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MR G CRAWFORD (instructed by Mander Cruickshank) appeared for Claimant.

MISS K McQUAIL (instructed by Bray & Bray) appeared for Defendant.

J U D G M E N T

[1]MR JUSTICE WARREN: The Hunt family have been farmers in Donington-Le-Heath, Leicestershire for many years. This unfortunate litigation follows the death of Mr Joseph Hunt, who died intestate on 11th June 2001. Letters of Administration to Joseph’s estate were granted to the claimant, Michael Hunt, who is the nephew of Joseph, being the son of Joseph’s brother, Lloyd. Lloyd had one other child, Gillian. Joseph had another brother called John, who is the father of David, the defendant to these proceedings, and he in turn has a son called Carl.

[2]I need not go back too far in the history other than to say that John and Joseph and David were in partnership as farmers. Before I say any more about the history, I should just say what the nature of the current application is.

[3]Michael brought proceedings in his capacity as administrator of Joseph’s estate against David. He commenced those proceedings on 19th August 2003. It sought to set aside a partnership agreement made between David and Joseph (the details of which I will come to) which was made on 23rd September 1986, and it sought to set it aside on the basis of lack of capacity, alternatively undue influence, alternatively unconscionable bargain. In the event, particularly as the result of a document which came to light comparatively recently in the history, i.e. December 2004, Michael has realised that his case, to put it neutrally, was not as good as he hoped it might otherwise be. Mr Crawford, who appears for him, asks that he has permission to withdraw these proceedings on the basis that Michael does not have to pay any part of David’s costs. There may or may not be issues also about what costs Michael in turn is entitled to take out of the estate.

[4]For completeness, I should say that the estate of Joseph, who died intestate, passes to David as to half, to Michael as to a quarter, and to Gillian as to a quarter, and there are no other beneficial interests in it.

[5]The normal rule under CPR 38.6 is that, unless the court orders otherwise, a claimant who discontinues is liable for the costs which a defendant against whom he discontinues incurred on or before the date on which notice of discontinuance was served on him.

[6]Mr Crawford accepts that the burden is on him to show that the normal rule is departed from. There is no helpful authority in relation to the application of that rule. Miss McQuail, who appears for David, has drawn my attention to Walker v Walker, which is referred to in the second supplement to the 2005 edition of the White Book, but I do not find that of any assistance in what I have to decide.

[7]There is, I am afraid, no alternative but to look at a considerable amount of the documentation which has been put before me, but I should first of all go to the partnership agreement, which is the source of the litigation.

[8]It was made between Joseph and David on 23rd September 1986. (I note in passing that the firm’s accountant is Mr Trevor Davis of Johnson Murkett & Hurst, of whom I will have to say a little more in a moment.) It provides materially for some unusual consequences of the death and retirement of Joseph. In contrast with what happens should David die or retire when his share passes to fair valuation, I shall read what happens in the case of Joseph. “In the event of the death or bankruptcy of Joseph, he shall be deemed to have transferred to David without payment but for valuable consideration the whole of his property, both real and personal, which shall at that date be used for farming, whether for the purposes of the partnership or otherwise.” [Quote unchecked]

[9]Pausing there, the two perhaps unusual features are that it passes without payment, and that what passes is not only partnership property but the land (at least that is how it has been treated, I think correctly) on which the partnership carried on business, the beneficial ownership of which at that stage was as to 50% in John’s estate and 50% in Joseph.

[10]By clause 8 of the partnership agreement: “In the event that Joseph shall attain the age of 65 years or shall desire to retire from the business of farming and of such his desire shall give to David six calendar months’ prior notice in writing, the partnership shall determine upon Joseph attaining the said age of 65 or upon the expiry of such notice as though Joseph had died on that date, but on the following terms.” [Quote unchecked] The following terms include provision for Joseph to be paid sums of money, if demanded, on an annual basis. In fact he never exercised that right and money was never paid to him. He continued living in the farmhouse with his brother’s widow, Mary. So one sees from clause 8 a deemed transfer, as though he had died, to David on Joseph’s 65th birthday. The following terms include provision for Joseph to be paid sums of money, if demanded, on an annual basis. In fact he never exercised that right and money was never paid to him. He continued living in the farmhouse with his brother’s widow, Mary. So one sees from clause 8 a deemed transfer, as though he had died, to David on Joseph’s 65th birthday.

[11]Following Joseph’s death (to cut this part of the story slightly short) Letters of Administration of Joseph’s estate were granted to Michael. There had been a proposal for Michael and David to be joint administrators, but those did not come to fruition.

[12]At this stage I need to rehearse some of the correspondence. I will pick it up on 20th August 2001, when Blakemores, who then acted for David, wrote to Mander Cruickshank, who acted for Michael. They write: “We can confirm that the late Mr Hunt [Joseph] had no interest in either the farming business or in the farmhouse since he attained the age of 65 years.” [Quote unchecked] That might have come as something of a surprise to Michael. That might have come as something of a surprise to Michael.

[13]Mander Cruickshank write back on 29th August 2001, saying: “Regarding the farmhouse, can you confirm to us when the deceased’s interest was transferred to David Hunt.” [Quote unchecked] They draw the correct inference that that is indeed what had happened. They draw the correct inference that that is indeed what had happened.

[14]On 21st December 2001 Mander Cruickshank write to Blackmores: “Turning now to the question of the deceased’s share in the farm, we must now ask you to supply full details of how the deceased divested himself of it. Our client knows that the deceased had a partnership interest in the farm, and if it should be that your client succeeded to that share under a partnership deed, we shall require a copy of the partnership deed and partnership accounts up to the date of the deceased’s retirement from the partnership and any valuations that were carried out at that time.” [Quote unchecked] It is reasonable to think that Michael at that time had no reason to believe other than that Joseph had been carrying on the partnership up to his death. It is reasonable to think that Michael at that time had no reason to believe other than that Joseph had been carrying on the partnership up to his death.

[15]On 14th January Blakemores write to Mander Cruickshank: “Our client has succeeded to the deceased’s interest in the farm under the terms of a partnership deed entered into on 23rd September 1986. We enclose a certified copy of the relevant parts of the deed.” [Quote unchecked] So it was a redacted copy that was sent. “Please note that Joseph Hunt’s signature was witnessed by his doctor who was present when the contents were explained, we are advised. Our client is not however prepared to disclose the partnership accounts to your client.” [Quote unchecked] By “partnership accounts” one can only assume that they meant the business accounts because, on their case (as I will explain in a moment), the partnership ceased when Joseph attained the age of 65, on 25th March 1989. So it was a redacted copy that was sent. By “partnership accounts” one can only assume that they meant the business accounts because, on their case (as I will explain in a moment), the partnership ceased when Joseph attained the age of 65, on 25th March 1989.

[16]On 16th January Mander Cruickshank wrote that they had misunderstood that reply, which was clarified by a letter on 23rd January from Blakemores to them, where they say: “Returning to the third paragraph of your letter, surely it is relevant (..read to the words..) balance sheet or the actual value of the farm.” [Quote unchecked] That related to a certification of value point which I do not need to touch on. “The partnership deed provides that Joseph’s interest in the farm in its entirety transferred to David on Joseph’s 65th birthday.” [Quote unchecked]

[17]On 14th March 2002 Mander Cruickshank write again, including the following: “In view of the deeming provision, we need to be convinced of the deceased’s mental capacity to enter into the partnership deed. Clearly there was some doubt about this, since you state in your letter of 14th January that his signature was witnessed by his doctor after the contents were explained, and we would question by whom. There was a clear conflict of interest between the two parties, who ought to have been separately represented.” [Quote unchecked] Then later in the letter: “We require a full copy of the partnership deed and should be pleased if you will supply the same.” [Quote unchecked] They also asked for bankbooks and other things relating to the deceased’s estate. Then later in the letter: They also asked for bankbooks and other things relating to the deceased’s estate.

[18]That produced a response on 31st May, so sometime later. I am afraid one sees throughout this litigation things moving at a fairly leisurely pace. The letter reads: “We have already produced to you the relevant extracts from the partnership deed entered into on 23rd September 1986 which clearly sets out that Joseph was retiring from the partnership on his 65th birthday and his interest was on that date transferring to our client. The accountants have now confirmed that JH Hunt retired from the business on 25th March 1989, being his 65th birthday, strictly in accordance with the partnership deed. We are totally at a loss as to what further information you can reasonably request from us. Joseph’s interest in the business clearly ceased on that date.” [Quote unchecked]

[19]Unfortunately, matters then seem to have proceeded on the basis of a dispute about documents. As will be seen in a moment, this case was really never about documents. It turned out to be about undue influence and the circumstances in which Joseph signed the partnership deed. It is unfortunate that it was not until later that the issue of undue influence was expressly identified and raised and pleaded. It is also unfortunate that David did not volunteer the information which would have nipped this whole application in the bud. However, I need to look at what has happened about the documentary applications.

[20]On 10th September Mander Cruickshank wrote to Blakemores, saying:

“Based on the information received to date, issues have arisen relating to the partnership deed and the circumstances in which Joseph Hunt in effect made a gift of his interest in the farm to Mr David Hunt. Depending on the circumstances relating to the execution of the deed, a claim was available for the gift to be set aside on the grounds of undue influence or unconscionable bargain. To try to avoid the necessity of the issue of proceedings, we invite you and Mr David Hunt to provide voluntary pre-action disclosure of the documents set out below.” [Quote unchecked] They list a number of documents, including “any document relating to the deceased’s dealings with land; any documentation or deeds relating to the land subsequent to 24th June 1969” – I am not sure of the relevance of that date; “a full copy of the formal partnership deed dated 23rd September 1986; and a copy of the partnership accounts for the period 13th April 1985 to the date when the deceased’s name no longer appeared on such accounts”

. So one sees in that letter a reference to undue influence and unconscionable bargain, but the nature of the potential claim is completely unparticularised, and indeed the solicitors were of the view that the provision of relevant documents might well avoid the necessity to issue proceedings at all. They list a number of documents, including “any document relating to the deceased’s dealings with land; any documentation or deeds relating to the land subsequent to 24th June 1969” – I am not sure of the relevance of that date; “a full copy of the formal partnership deed dated 23rd September 1986; and a copy of the partnership accounts for the period 13th April 1985 to the date when the deceased’s name no longer appeared on such accounts”. So one sees in that letter a reference to undue influence and unconscionable bargain, but the nature of the potential claim is completely unparticularised, and indeed the solicitors were of the view that the provision of relevant documents might well avoid the necessity to issue proceedings at all.

[21]On 20th September 2002 Mander Cruickshank again wrote to Blakemores, complaining in effect about the non-provision of the document dated November 1998. That document had been sent to Crane & Walton, who were Mary Hunt’s solicitors, and they expressed surprise, therefore, why that should not be delivered to them as well.

[22]On 2nd October 2002 Blakemores write to Mander Cruickshank. The first paragraph reads: “Further to our letter of 18th September we thought that before issuing proceedings for our client to be made an administrator” [Quote unchecked] I should add here that at this stage David was considering making an application again to become an administrator “we should send you a draft of an affidavit prepared by our client’s counsel, setting out the ground for his application. We enclose a copy of the proposed summons.” [Quote unchecked] That was in fact a summons that was never issued. “As you will see, with the affidavit we have sent you a copy of certain copy documents including the deed of partnership requested by you.” [Quote unchecked] So that was the date on which there was the first provision of an unredacted deed. I should add here that at this stage David was considering making an application again to become an administrator That was in fact a summons that was never issued. So that was the date on which there was the first provision of an unredacted deed.

[23]It seems that it was likely that with that letter were also sent copies of two deeds made on 19th February 1997. One of the documents respectively appointed David and his wife Valerie as trustees of a 1977 conveyance which related to some of the farmland and says that Joseph was a party to that deed as one of the appointers. The other document is also dated 19th February. Joseph is a party and David and his wife are parties. The result of that is that the land concerned which has been vested in the trustees is held as to David as to 50% and for David and Valerie as to 50% upon the trust of the will of John.

[24]Apparently this was all done in connection with a demand by the local water authority. I do not think anything turns, for present purposes, on the provisions in those documents.

[25]On 13th January 2003 Mander Cruickshank wrote to Blakemores, referring to previous correspondence. They reject the suggestion that David should become a joint administrator and say this: “Information has now been given by you in relation to matters in dispute raised in previous correspondence, but as such does not entirely answer the questions which have been put to your client previously, and in particular does not answer the question why Joseph Hunt should have chosen to dispose entirely of his interest n the land and partnership property to David. Nor does it clarify such matters as when Joseph retired, his income between 1989 and 2002 etc and the capacity of Joseph at the time of executing the 1985 [1986] and 1989 deeds. Documentation relating to such deeds, the drafting, delivery and execution thereof together with partnership and business and bank accounts would give such clarification. If such were disclosed, then our client is placed in a better position to correctly administer Joseph’s estate and at the same time decide whether or not to proceed with the proposed action against your client. In the circumstances, we urge you to consider disclosure in accordance with the schedule attached hereto.” [Quote unchecked]

[26]I will look at the schedule in a moment, but I will just draw attention to what I have read, where the solicitors identified what is concerning them, which is the question why Joseph should have chosen to dispose entirely of his interest. That is a question which it would have been easy for David to answer. Unfortunately he did not. Instead, his solicitors focused on the formal request in that letter which related again to documentation.

[27]In the schedule there were three main headings:

“Documentation in the control of the respondent relating to the instructions for the preparation of and the subsequent preparation and drafting of an execution, including attestation of a number of documents including the partnership deed.”

Secondly: “Any documentation in the control of the respondents relating to the farming partnership…between the date 13th April 1985 and the date at which Joseph Henry Hunt attained the age of 65 in 1989” – that includes partnership accounts and partnership assets and dissolution accounts. Then there was a similar request in relation to the partnership, alternatively the business formerly carried on by the partnership from that date until 19th February 1997.

[28]On 29th January the solicitors write again saying: “You failed to reply to that letter and both yourselves and your clients have failed to supply the information and documentation requested by that and previous letters.” [Quote unchecked] So that is referring to information as well as documentation and I would have thought might well be regarded as including an answer to the question asked on 13th January as to why Joseph Hunt should have chosen to dispose entirely of his interest in the land. They go on: “This non-disclosure and failure to assist has brought suspicion upon your client’s conduct particularly when looked at alongside the disclosure of the partnership deed with parts thereof blanked out. In the light of this, our client has had to give consideration to bringing an action to setting aside the transactions, i.e. 1985 [there is again a reference to 1986] and 1997 deeds on the grounds of undue influence.” [Quote unchecked] So one sees there again an express reference in January 2003 to undue influence, again particularised. “It is for the reasons set out above that our client cannot consent to your client’s proposed application to become co-administrators.” [Quote unchecked] Then they refer to a desire to avoid wishing to rush into litigation and the efforts made by Michael through the solicitors to investigate all relevant matters and carry out his duties as administrator, asserting that they had been thwarted by David’s obstructive attitude shown by his lack of response to the numerous requests. So that is referring to information as well as documentation and I would have thought might well be regarded as including an answer to the question asked on 13th January as to why Joseph Hunt should have chosen to dispose entirely of his interest in the land. They go on: So one sees there again an express reference in January 2003 to undue influence, again particularised. Then they refer to a desire to avoid wishing to rush into litigation and the efforts made by Michael through the solicitors to investigate all relevant matters and carry out his duties as administrator, asserting that they had been thwarted by David’s obstructive attitude shown by his lack of response to the numerous requests.

[29]On 5th February they write: “Further to this matter, we must now, in the light of the failure of you and your client to supply all necessary documentary information as detailed in previous correspondence to enable our client to proceed with the administration of the estate, give consideration to the institution of further proceedings. Such proceedings would seek a declaration of entitlement as to the information documentation as administrator (..read to the words..) possession of your clients or yourselves.” [Quote unchecked] So again this is a documentary application that is being considered. “To avoid yet a further involvement of the court, we ask that you comply within the course of the next seven days with the request previously made for disclosure. This request is made to you in addition to the requests previously made of you and your client to supply implementation documentation relating to the CPR Rule 31 application which is at the present time with the court.” [Quote unchecked] So again this is a documentary application that is being considered.

[30]On 22nd February 2003 an application for pre-action disclosure was made to the court. I will deal with the order that was obtained in May chronologically when I get there.

[31]On 14th March Bray & Bray, who now acted for David, having replaced Blakemores, write: “We have been instructed in place of Blakemores. It appears to us that your client has considerable difficulties in pursuing this matter for the matters set out below.” [Quote unchecked] They list four matters, the second of which reads: “Taking into account the circumstances surrounding this matter, on what basis does your client claim to have a cause of action against our client? Again we await your clarification on this matter.” [Quote unchecked] They list four matters, the second of which reads:

[32]On 19th March Mander Cruickshank write to Bray & Bray, saying: “We thank you for your letter of 14th March, the contents of which we note. We would advise you that a skeleton argument is being prepared and will be submitted to you in due course and which will doubtless answer any queries which you have in relation to our client’s entitlement to take action against your client.” [Quote unchecked]

[33]Mr Crawford, who appears before me and who appeared in relation to the pre-action disclosure application, tells me that he did produce a skeleton argument, which was of course provided to David’s advisers, which complied with the requirements of CPR 31.16, and that his opponent too put in a skeleton in answer. Neither of those documents are before the court. Miss McQuail takes no point on that and I believe accepts what Mr Crawford says about their contents. Mr Crawford says, in effect, that his skeleton would have adumbrated the case that appeared in the pleading (which I will come to) and he says that his opponent’s skeleton did not set out David’s case on the merits, which subsequently appears in his Defence. It was directed more at purely legal issues, saying that this was not an appropriate case for pre-action disclosure.

[34]The matter came before Deputy Master Lloyd on 6th May, and he made an order for pre-action disclosure. It did not go as wide as had been sought, but it went pretty wide. The application was based on the schedule (to which I have already referred) and the deputy master effectively ordered that headings 1 and 2 in that schedule should be provided. He made an order for costs, that the claimant pay the costs of the application (as is the normal rule under CPR 31), but he made an exception: other than the costs of this hearing, as to which the claimant was to receive two-thirds of his costs from David.

[35]A list was sent pursuant to the deputy master’s order late (but not in the context of this whole litigation very late). It was sent on 3rd July, and I shall need to go through some of the documents disclosed.

[36]On 9th July, in response to the list, Mander Cruickshank write to Bray & Bray: “We note from the documents disclosed the letter from Blakemores to Mr Hunt dated 20th August 1986 in which reference is made to Nick Makin’s file” [Quote unchecked] He was a solicitor then acting for the partnership. “and the agreement of the terms of the partnership agreement. That letter also referred to a meeting on 3rd September. Are you or your clients in receipt of any correspondence and/or attendance notes. These queries are raised since we note that the disclosure list received by us is not certified by your client. This should be remedied forthwith.” [Quote unchecked] He was a solicitor then acting for the partnership.

[37]Bray & Bray eventually responded on 17th July, confirming that they had disclosed all relevant documents in this matter: “If documents have not been disclosed, that is either because they did not exist and our client does not have them, or that, in the alternative, they are protected by privilege.” [Quote unchecked] That sentence is perhaps ambiguous, in that “and our client does not have them” should read “or our client does not have them”, which I rather doubt. In any event, the sense of that letter is quite clearly that David did not have in his possession any documents at all which had not been disclosed. That sentence is perhaps ambiguous, in that “and our client does not have them” should read “or our client does not have them”, which I rather doubt. In any event, the sense of that letter is quite clearly that David did not have in his possession any documents at all which had not been disclosed.

[38]The disclosure produced a large number of documents. There was a disclosure statement signed by David on 3rd July, where he says, amongst other things, that he did not “search for documents elsewhere than outside the addresses that appear on the documents and letters disclosed herewith”. Those addresses include letters to and from the accountants and the solicitors who were dealing with the matter at the time, and that has some impact for a point which will arise.

[39]I can go through many of these documents very quickly. There are some drafts of the partnership agreement, which I do not think I need refer to. There are dealings with the solicitors acting for the Severn Trent Water Authority in relation to the grant of an easement.

[40]There is a letter of 20th August 1986, which was mentioned in the correspondence, from Blakemores to Joseph, in the period leading up to the signing of the partnership agreement. Blakemores in fact acted for the partnership, probably without distinguishing between David and Joseph. This is a new solicitor, Margaret Whitehouse, who had taken over from Mr Makin (I think probably on the merger or takeover of Makin Sumner by Blakemores). In this letter she says; “I note from reading through Nick Makin’s file the terms of the partnership agreement to be entered into between yourself and your nephew David Hunt appear to have been agreed and I have therefore prepared the agreement in readiness for you both to sign. I enclose herewith a copy of the agreement for your perusal. I wonder if it would be convenient for you to call into this office on Wednesday 3rd September next at 11.30 to discuss and sign the agreement. This appointment is convenient to Mr Davis and myself, and I have already contacted your nephew to see if it is convenient for him.” [Quote unchecked] Mr Davis was the partnership accountant.

[41]In fact it was three weeks later that the document was actually signed. That appointment on 3rd September never happened. It was not signed at Blakemores’ offices either; it was signed at the farm and was witnessed by Dr Torrance, who was on a visit to the farmhouse, so far as he can recollect, visiting Mary.

[42]There is disclosure of some accounts, and there is disclosure of a letter of 22nd May 1990 where the accountant, Mr Davis, is querying the effect of the partnership deed. This is a letter from the accountants to the partnership, at David’s address, dealing with the treatment of Joseph’s retirement from the partnership on 25th March 1989.

[43]Then on 26th September 1986, i.e. three days after the execution of the partnership agreement, there is a letter which Mr Crawford at least (and probably others, including myself) finds slightly difficult to understand. This is from Mr Falowell, who is a chartered surveyor who was acting for the partnership, to Mrs Whitehouse. He writes: “As I understand the situation, Mr David Hunt is most concerned as to the current working of his partnership with Mr Joseph Hunt having regard to the fact of the latter’s incapacity.” [Quote unchecked] That is now accepted to mean a physical incapacity and not a mental incapacity. “At the time of my visit, Mr Hunt explained that he was becoming extremely frustrated by the arrangement and was seriously considering putting the property on the market, and to this event he had not intended carrying out his usual cultivations for next year’s harvest. To this effect I advised Mr Hunt that even if I was instructed straight away to deal with the sale it would be essential for him to continue farming, as there are a number of enquiries which must be made before any sale is contemplated, principally concerning the possible development of the land immediately adjoining the farm within the village of Donington-Le-Heath.” [Quote unchecked] That is now accepted to mean a physical incapacity and not a mental incapacity.

[44]One does not know to what time he is referring when he says, “At the time of my visit”. It is reasonable to assume that it was before the partnership deed was executed, but his letter is dated only three days after it was executed. It is quite probable, therefore, that, when he visited David, David did not know that Joseph was actually going to execute the document, notwithstanding that it had been drafted for some time and that there had been a request by the solicitors to Joseph to come in to execute it. Be that as it may, that is apparently what happened when Mr Falowell visited.

[45]That was the state of the disclosure so far as relevant in July 2003. In the light of that, clearly Michael and his advisers remained concerned about the execution of the partnership deed, and the next step was for them to launch proceedings, which they did on 19th August. The claim form was amended in March 2004, but for current purposes there is only one material amendment (which I will come to later).

[46]The pleaded case sets out the partnership agreement and says in paragraph 7: “Joseph lacked sufficient mental capacity to execute the 1986 deed and 1997 conveyance. The claimant relies on the following matters.” [Quote unchecked] It sets out five factors to show that he did not have mental capacity. The fifth is incorrect, because it is based on the misconception that Mr Falowell was referring to mental incapacity in his letter when he meant physical incapacity. The particulars under paragraph 7 refer to Joseph’s lack of education and plead that no explanation was given of the document and that Joseph continued to act as if nothing had changed. It sets out five factors to show that he did not have mental capacity. The fifth is incorrect, because it is based on the misconception that Mr Falowell was referring to mental incapacity in his letter when he meant physical incapacity. The particulars under paragraph 7 refer to Joseph’s lack of education and plead that no explanation was given of the document and that Joseph continued to act as if nothing had changed.

[47]One might think that those pleadings, by themselves, were woefully inadequate to justify a pleading of lack of capacity, but that is not really the basis of the case. The basis of the case is undue influence or, alternatively, unconscionable bargain. As it is quite short, I will read paragraph 8: “Further or in the alternative the fact that the 1986 deed purported to transfer Joseph’s entire interest in the partnership business and in the farm, which was not partnership property, to the defendant upon whom Joseph relied wholly to take the financial and management decision in regard to the running of the farming business and in whom he placed his trust and confidence in connection therewith, to no actual benefit raised a presumption that the deed was induced by the undue influence of the defendant upon Joseph. The defendant is accordingly under an evidential burden to show that the 1986 was a fair and reasonable transaction, and carry into effect Joseph’s freely and independently formed wishes. On that basis the 1986 deed is vitiated by undue influence. The 1997 conveyance, which seeks to carry into effect the provisions of that deed, ought to be set aside. Further and in the alternative, the claimant invokes the jurisdiction of equity (..read to the words..) of the 1986 and the 1997 conveyance.” [Quote unchecked]

[48]I will deal with the amendment here, because it is quite short but relevant. It is quite clear that what it does is add an allegation that Joseph lacked capacity and that David knew of that fact – that being relevant to a claim to set aside a contract on the grounds of undue influence.

[49]That was the first occasion on which the true nature of Michael’s case was clearly put. There had been references to undue influence in the correspondence. It cannot have come as a surprise to David to see that, and indeed the skeleton which Mr Crawford put in for the purposes of the previous application, which as I have said I have not seen, he told me did include that information as well.

[50]That resulted in a Defence on 2nd October which, for the first time, set out, at paragraph 6, David’s stall in relation to the execution of the partnership deed. I am not going to read it, because it is quite lengthy, but I shall summarise the thrust of it, which is that he had been concerned about his position in the partnership following John’s death because he had no security and by the time that his uncle Joseph came to retire, it would be too late for him to embark on another career, he would have no security on the farm, and his proposal was to leave then and there unless his uncle would guarantee an inheritance to him, and that was what was reflected in the 1986 partnership deed. It was a freely entered into bargain between Joseph and David effectively to allow Joseph to continue in partnership until he was 65 and for the farm to pass eventually to David and his son Carl.

[51]That was the pleading. It did not result in the discontinuance of this action at that stage. Instead, there was a claimant’s request for further information. I have not seen it, but there was also a defendant’s request for further information, and the proceedings went on.

[52]During the course of 2004 there was an application for an order issued on 9th February to amend the Particulars of Claim and for certain further information, which came before the court, and a consent order was made on 22nd March. Thereafter, correspondence proceeded between the solicitors.

[53]Mander Cruickshank, as a result of the request for further information by Bray & Bray for David were alerted to the possibility that there might be further information which could usefully be given by Mr Davis. They write on 22nd April 2004: “We have taken instructions with regard to the information sought by you and this has involved discussions with Mr Davis. It is understood from Mr Davis that he has recently attended upon yourselves and was going through documentation which you have obtained and which was of relevance to the case. It was arranged that he would return to us in order that we could complete our enquiries, thus enabling us to supply to you the information requested. We are waiting to hear from Mr Davis, but understand that there is documentation relevant to this case, and it would appear that this should have but has not been disclosed. In those circumstances we invite you to disclose this documentation which may or may not have a bearing on the case.” [Quote unchecked]

[54]Bray & Bray respond on 13th May, confirming that they have recently met with Mr Davis for the purpose of looking through some of the documentation which it had obtained from the family accountants. “We have only seen photocopies and have not made enquiries of the accountants for the purposes of inspecting the originals to see whether or not there is any further documentation which may assist in this case. Once we have made those arrangements we will of course make full disclosure to you of any additional documents that may assist the parties.” [Quote unchecked]

[55]On 17th May Mander Cruickshank write: “It appears that the defendant or Mr Davis do have documents which ought to have been disclosed, and ask that they be disclosed within 14 days.” [Quote unchecked]

[56]Bray & Bray eventually got those documents, but they were concerned that there might be a privilege issue. In retrospect, one can see that this was a mistaken idea. The documents, which I will come to, included a note taken by Mr Davis at a meeting relating to the instructions for the partnership deed. If there was any privilege attached, it was a privilege that could be asserted by Joseph and therefore, paradoxically, by Michael as Joseph’s administrator, whereas these documents had in fact been provided by Mr Davis to Bray & Bray, and they were considering whether there was an issue of privilege that David, rather than Michael, could assert. In the end they were disclosed, but not until November 2004.

[57]By 27th May Mander Cruickshank were complaining that the failure to disclose these documents was already a breach of the order of Deputy Master Lloyd and effectively say that they should have been disclosed shortly after that order. It is not until June 23rd that Bray & Bray say that they are now making arrangements to go and inspect the documents that Mr Davis has told them he has. They say: “Once inspection has taken place, a supplemental list will be prepared. You will then be entitled to copies of any documents produced.” [Quote unchecked] But they reserve their position on privilege. But they reserve their position on privilege.

[58]On 29th October – there is a long gap in the relevant correspondence – Bray & Bray write to Mander Cruickshank, saying: “We refer to the above matter and enclose a copy of an attendance note taken by Mr Trevor Davis on 16th January. We do not intend at this stage to serve a supplemental list and would ask that you add this to our disclosure. Taking into account the content of the note which was taken at the time, we believe that your client is now in some difficulty with the case.” [Quote unchecked]

[59]That is all the correspondence I need refer to, but in a final review of the documents I need to look at the supplemental disclosure. It starts with a letter of 7th May 1985 from Mr Makin of Makin Sumner (the predecessors to Blakemores) to Mr Davis: “As you know, a meeting has been arranged with David Hunt in order to discuss the long-term future of the farm. What happens so far as the estate is concerned will to a large extent depend upon David’s decision whether or not to continue with the partnership. However the long-term interests of the partnership are a separate issue from [John’s] estate and must be kept separate so as not to confuse the trust’s interests with David’s.” [Quote unchecked]

[60]One then sees the minutes of the meeting to be held on 8th May to discuss the future of the farming partnership.

[61]On 22nd August 1985 Mr Davis wrote to Makin Sumner, saying: “We recently had a meeting with Mr David Hunt who said that he had spoken to his uncle [Joseph] and had made it clear that he would only be interested in continuing with the farming business if his future was totally secure from the point of view of inheritance of the farmland. Apparently Mr Joseph Hunt seemed conciliatory on this point and agreed to consider drafting a proper will.” [Quote unchecked]

[62]There is then the important note of 16th January 1986. This was a meeting between Joseph, Mary and Mr Makin attended by Mr Davis. “Mr Davis told Joseph that he thought the farm would have to be sold if a will was not done. Joseph told Mr Davis that he wanted the farm not to be sold but for the family to continue running the farm indefinitely.” Then the last point: “Mr Makin was to prepare a partnership agreement making all the farmland an asset of the partnership.” [Quote unchecked] Then the last point:

[63]Then on 6th October 1986 Mrs Whitehouse wrote to Mr Davis, saying that she was pleased to advise him that Joseph had signed the partnership agreement.

[64]That completes the documentation.

[65]In the light of all that material, it seems to me that the actions of Michael and his solicitors at the beginning of this story were entirely reasonable. They had in front of them a document which, one has to say, did properly raise concerns, and they were entitled to have those concerns addressed. Unfortunately, the way that matters proceeded in the correspondence, and it is difficult to blame one side more than the other, did not identify what was really in issue. It was only when the skeletons were exchanged in relation to the earlier application that David and his team had full notice of what the claim was, but they did not respond until the pleading to explain what the answer to the underlying problem really was.

[66]I consider that up to 2nd October, when the Defence was served, the claimants were behaving reasonably. Reasonableness, of course, is not necessarily the correct test for costs, but it is a significant factor in the way that I must exercise my discretion. When it came to the service of the Defence, for the first time Michael knew what David’s case then was. Unfortunately, by then he had of course already issued proceedings, and those are proceedings that he may well not have issued if he had had that information before he proceeded. However, he did not at that stage discontinue or seek to discontinue his proceedings, but sought further information and allowed the litigation to run on until the application was made to discontinue, which is what I am hearing today.

[67]It is of course a different matter to withdraw proceedings once they have begun; it is a more difficult decision to take than one not to commence proceedings which have begun, which is why the note and the other material in the subsequent disclosure is of importance. There can be no doubt that, had that note been disclosed at an earlier stage, these proceedings would not have been commenced or, if commenced, they would have been sought to be withdrawn earlier. Can either side be blamed or visited with the consequences of Mr Davis’ note not having been discovered before? It fell strictly within the order that Deputy Master Lloyd made. Miss McQuail says that David and his solicitors cannot be criticised for having failed to make enquiries of Mr Davis or his firm in relation to ascertaining whether or not there might be documents in their files which by then would have been 15 years old. The truth of the matter, as she accepts is probably the case, is likely to be that nobody actually thought about asking them, rather than that they thought about asking them and decided not to. It was the obligation to make a reasonable search and I do think that, if anybody had thought of asking Mr Davis or his firm to see if they had anything of relevance, the answer would have been, “Of course, we must ask. We don’t hold out much hope of finding anything, but we must ask”, and that is what the search should be. If the answer had come back, “We have destroyed our records”, that would have been an end of the matter. I appreciate that it is easy to be wise with hindsight, but I think it would have been appropriate for an enquiry at least to have been made both of the accountants and solicitors to check that there was no relevant documentation.

[68]But in this regard I cannot think that Michael is free of a similar criticism. Although he was not subject to an order for disclosure, it was in his own interest to find out as much as he could. Michael, representing Joseph, was as much a client (if not more so) of the accountants and the partnership accountant and solicitor as was David, and he could himself have made suitable enquiries to obtain this information himself.

[69]This leaves the final decision really quite a finely balanced one, but in my judgment it would not be appropriate to order that Michael should pay David’s costs of this action. It is a different question, and I believe that the two have to be resolved together. As they say, this is a package which you cannot cherry-pick. It would not be appropriate, at the same time, to then allow Michael to recover his costs from the estate, thus throwing the burden as to half onto David. Whichever way one draws the picture, the result, in my judgment, must be that no costs are borne by the estate, but that Michael does not have to pay David’s costs.

[70]If that is in some way an inadmissible result, it can, I think, be achieved in a different way by making more complicated orders concerning what comes out of the estate and more complicated orders about how the costs of the action are to be borne. Mr Crawford submits that the two questions are completely independent, but I am afraid that, in family litigation of this sort, I cannot regard them as independent. If Mr Crawford’s client had made a Beddoe application, as he might have done, he would no doubt have been met with a submission from Miss McQuail that this was family litigation. It would be inappropriate for any order for costs out of the estate pre-emptively. It is hostile litigation between adult persons. Gillian, of course, is not a party to these proceedings, and she would have been the only person who would have been affected differently from the parties to these proceedings. What would have happened, I think, had a Beddoe application been made, is that the court would have ordered proceedings to be commenced in which Gillian could have been joined. Anyway, that was not done and I do not think it is open now to Michael to seek the sort of relief which he wishes he could have got had he made a Beddoe application.

[71]That then is my decision, that Michael does not have to pay David’s costs of the action. Equally, David does not have to pay Michael’s costs of the action, but Michael does not get his costs out of the estate. __________