Provincial Bank of Ireland v McKeever

• Jurisdiction: Ireland
• Judgment Date: 31 July 1941
• Date: 31 July 1941
• Court: High Court

Provincial Bank v. McKeever

PROVINCIAL BANK OF IRELAND

and

FREDERICK EDWARD McKEEVER and EDITH ALICE McKEEVER

Trustee - Cestui que trust induced by trustee to execute deed in favour of third party - Voluntary benefit conferred on trustee - Undue influence - Presumption of, as against third party - Notice of - Rebuttal of presumption.

Where a trustee takes a voluntary benefit from his cestui que trust there arises a presumption that the benefit was obtained by undue influence, that is, by an unconscientious use of a power arising from the circumstances and conditions of the relationship. This presumption will arise, notwithstanding that the fiduciary relationship has ceased to exist, unless it can be clearly inferred that the influence presumed to arise from the relationship previously existing between the parties has in fact ceased to operate.

Hatch v. Hatch, 9 Ves. 292; and Wright v. Carter, [1903] 1 Ch. 27, applied.

Where a trustee induces his cestui que trust to execute a deed in favour of a third party, which deed directly or indirectly confers a voluntary benefit upon the trustee, although not a party to the deed, there arises a presumption of undue influence, not only against the trustee but also against the third party, if the latter be aware of the circumstances under which the deed was executed. It is not necessary that the third party should claim under the trustee.

Dictum of Fry J. in Bainbrigge v. Browne, 18 Ch. D. 188, at p. 197, discussed;Turnbull & Co. v. Duval, [1902] A. C. 429, applied.

The presumption of undue influence may be rebutted, irrespective of whether or not the cestui que trust has had independent advice, if it be shown that the transaction was the result of the free exercise of an independent will.

Inche Noriah v. Shaik Allie Bin Omar, [1929] A. C. 127, and Mills v. Fox,37 Ch. D. 153, applied.

In considering whether the onus of rebutting the presumption has been discharged, the Court will have regard to the probability or otherwise of the complaining party's having understood what he or she was doing, the degree of personal interest in the transaction possessed by the party whose undue influence is presumed, and the presence or absence of improvidence in the transaction.

W. McK. by his will devised his lands to trustees upon trust to pay his wife, E., an annuity for her life, to pay her the balance of the income for the maintenance of their two sons, T. and F., until the younger should attain 21 years, and then to pay F. the sum of £9,000, the residue to be held for T. on hie attaining 23 years, charged with the payment of the said annuity. After the testator's death the trustees managed the lands for some years, and in doing so became considerably indebted to the plaintiff Bank. When both T. and F. had attained their majority, they executed a mortgage of their respective interests in favour of the Bank to secure the said overdraft. Their mother, E., joined in the said mortgage deed, by which she agreed to postpone her annuity to the said mortgage. The overdraft was thereupon transferred from the trustees' account to the mortgagors' account. T., F., and E. executed the mortgage under the supervision of the trustees' solicitor, who was an uncle of T. and F., and they had no other legal advice. In an action by the Bank against F. and E. for certain declarations as to their rights under the mortgage it was pleaded by F. and E. that they were induced to execute the said mortgage by undue influence.

Held, applying the principles set out above, that, the Court being satisfied, on the balance of probability, that the transaction was the result of the free exercise of an independent will by each of the mortgagors, and that the nature and effect of it was explained to them and understood by them, the presumption of undue influence arising from the circumstances of the case had been rebutted.

Plenary Summons.

The plaintiffs, by their plenary summons, claimed:—

1. A declaration that as between the plaintiffs and the defendants the charge in favour of the plaintiffs created by an indenture of mortgage, dated 14th August, 1925, and made between Thomas Henry Wright McKeever of the first part, the defendant Frederick Edward McKeever of the second part, the defendant Edith Alice McKeever of the third part, and the plaintiffs of the fourth part, on the hereditaments and premises described in the schedule thereto ranked in priority to all claims by the defendants or either of them against the said hereditaments and premises under the provisions contained in the will, dated 22nd June, 1920, of William Frederick McKeever, deceased, or otherwise howsoever.

2. A declaration that the appointment of William Hopkins Jordan as receiver over the said hereditaments by an indenture, dated 15th December, 1936, and made between the plaintiffs of the one part and the said William Hopkins Jordan of the other part, was valid and effectual against the defendants in regard to the rights thereby conferred upon the said receiver to collect and receive the rents and profits of the said hereditaments.

3. An injunction restraining the defendants and each of them from obstructing or interfering with the said receiver in the performance of his duties as such.

The material portions of the Statement of Claim were as follows:—

"1. By his will, dated 22nd June, 1920, William Frederick McKeever of Parsonstown Manor, who died on 11th August, 1920, devised and bequeathed all his property to his trustees on trust to permit his wife, Edith Alice McKeever, to reside in Parsonstown Manor during her life or until she should re-marry and to pay to her an annuity from the residuary estate of £300, and to pay the balance of the income from the residue to her for the support, maintenance and advancement of their two sons, Thomas Henry Wright McKeever and Frederick Edward McKeever, one of the defendants herein, until the younger should attain the age of 21 years, and then to pay the defendant, Frederick Edward McKeever, the sum of £9,000, the balance to be held for the said Thomas Henry Wright McKeever on his attaining 23 years charged with the said annuity of £300. The said bequests to the testator's two sons were assented to by the executors and trustees, William Charles and Thomas Deane McKeever, brothers of the testator.

2. It was recited by the said indenture of mortgage, dated 14th August, 1925, that the defendant, Edith Alice McKeever, had, at the request of the said Thomas Henry Wright McKeever and of the defendant, Frederick Edward McKeever, agreed to join in the said indenture for the purpose of postponing her annuity and all other her rights and claims over the hereditaments and premises comprised therein, and the said Thomas Henry Wright and Frederick Edward McKeever jointly and severally covenanted for the payment to the plaintiffs on demand of all moneys due or to become due with interest as specified, and the said Thomas Henry Wright McKeever demised and granted to the plaintiffs the leasehold and freehold premises to which he had become entitled under the aforesaid trusts, and the defendant, Frederick Edward McKeever assigned to the plaintiffs his legacy of £9,000, and the defendant, Edith Alice McKeever granted and released the said hereditaments unto the plaintiffs freed and discharged from all rights, claims, annuities, and charges to which she was entitled under the said will or otherwise.

3. It was further provided that nothing in the said mortgage should prejudice or affect the said rights of Edith Alice McKeever except so far as regards the hereditaments and premises therein comprised, and that as regards the same nothing should prejudice or affect them any further than by postponing her said annuity and her other rights therein to the security thereby effected.

4. The said indenture of mortgage is identical with a draft approved of by Francis McKeever, solicitor, on behalf of the said Thomas Henry Wright McKeever and the defendants, and it was duly executed by the said parties in the presence of the said Francis McKeever and A. G. Mullen, solicitor, as attesting witnesses.

5. The defendant, Edith Alice McKeever, informed the plaintiffs on their demanding payment on foot of the mortgage that she claimed that her right of residence and to the annuity of £300 came before the plaintiff's charge, and the defendant, Frederick Edward McKeever, informed the plaintiffs that if he signed any document he did so not knowing the contents of the same, and that he would resist any attempt to place a receiver over the property."

The defence of Edith Alice McKeever averred:—

"1. After the death of the testator the trustees of his will, who were brothers of the testator, took possession of, and farmed and managed, the lands. The said farming was not successful, and from time to time the trustees obtained accommodation from the plaintiffs on their personal credit as they alleged for the purpose of enabling them to continue their working of the lands, and at the end of 1924 the overdraft was £4,000. The defendant, Frederick Edward McKeever, was an infant until 29th December, 1924, and his brother, Thomas, attained the age of 23 years on 10th May, 1924.

2. The trustees solicitor, Francis McKeever, who was also a brother of the testator, determined that his clients should procure the said Thomas Henry and Frederick Edward McKeever to take over and discharge the trustees' liability for the said Bank debt, and to release the trustees, and procure their release by the plaintiffs. A meeting of the trustees and beneficiaries was accordingly called by Francis McKeever about the end of March, 1925, when all parties interested were present. At this meeting the present defendant realised for the first time the heavy losses which had been incurred, and she protested against her sons being compelled to make them good. Francis McKeever insisted that his clients as trustees were entitled to be indemnified, and...