Cheese v Thomas [1994] 1 WLR 129 (CA)

Facts

• Thomas, a nephew, persuaded his elderly uncle, Cheese, to sell his house and jointly purchase a new property with the proceeds.
• The agreement specified that each would own a share in the new property proportional to their contributions.
• The property market subsequently declined, and when the property was sold at a loss, Cheese sought to recover his full contribution, alleging undue influence.
• Cheese claimed that a relationship of trust and confidence existed and that undue influence vitiated his consent to the transaction.

Issues

1. Whether the arrangement between Cheese and Thomas was the result of undue influence due to a relationship of trust and confidence.
2. Whether the transaction was manifestly disadvantageous to Cheese at the time it was made.
3. What the appropriate remedy should be where undue influence is alleged in joint property purchases, particularly when the property is sold at a loss.

Decision

• The Court of Appeal found that a relationship of trust and confidence existed between Cheese and Thomas.
• It held that the transaction was not manifestly disadvantageous to Cheese at the time of entry, as joint property purchases naturally involve risks.
• The loss from the property’s decreased value was deemed a shared risk, not one solely attributed to undue influence.
• The court concluded that full restitution to Cheese was not appropriate; instead, the remaining proceeds should be divided in proportion to the parties’ initial contributions.

Legal Principles

• Undue influence can render a contract voidable when a relationship of trust and an unexplained or unfair transaction exist.
• There are two primary forms of undue influence: actual (proven improper pressure) and presumed (arising from relationships of trust and questionable transactions).
• Remedies in undue influence include rescission and restitution, but courts may favor flexible approaches, such as partitioning property, when full unwinding is impractical or inequitable.
• Joined property ventures entail shared risks, and loss will generally be apportioned in line with contributions unless a transaction is clearly manifestly disadvantageous.

Conclusion

Cheese v Thomas [1994] 1 WLR 129 (CA) establishes that, in cases of undue influence involving joint property ownership, relief should focus on equitable loss sharing based on each party’s contribution rather than full restitution, especially when market changes make unwinding impractical. The case emphasizes fact-specific remedies and recognizes the realities of shared risk in familial property transactions.