Thompson v Foy [2009] EWHC 1076 (Ch)

Facts

• The dispute involved Thompson and her daughter, Foy, regarding property ownership and rights to an extension built by Foy on Thompson’s property.
• By informal family agreement, Foy was to own the extension she constructed.
• Foy and Thompson planned to relocate to Spain, with Foy intending to mortgage the property, lease it, and use the proceeds for mortgage payments.
• Part of the mortgage funds was to be paid to Thompson so she could purchase a separate property.
• Thompson signed a family arrangement deed and a gift deed transferring interests to Foy.
• After the deeds were signed, Thompson decided to remain in England.
• Foy obtained a mortgage but gave Thompson only £60,000 initially, citing false inheritance tax issues as a reason for not paying the agreed £200,000.
• The property was not leased as anticipated, resulting in mortgage payment defaults and subsequent repossession by the bank.
• The relationship between Thompson and Foy broke down following these events.

Issues

1. Whether Foy had established a proprietary estoppel interest in the extension on Thompson’s property.
2. Whether the family arrangement and gift deeds were procured by Foy’s undue influence over Thompson.
3. Whether Thompson’s interests constituted an overriding interest that took priority over the bank’s charge.

Decision

• The court found that Foy established a proprietary estoppel interest due to her detrimental reliance on the informal agreement to build the extension.
• The court held that undue influence could not be presumed between mother and daughter, and actual undue influence was not proven by Thompson.
• Independent legal advice received by Thompson before entering into the arrangement was material in negating the case for undue influence.
• The court concluded that, even if undue influence had been found, Thompson’s equitable interest did not arise prior to Foy’s misappropriation of the mortgage funds and so could not bind the bank.
• Thompson’s right did not qualify as an overriding interest capable of taking priority over the bank’s charge as it did not satisfy the requirements under the Land Registration Act 2002.

Legal Principles

• Proprietary estoppel may arise where a party acts to their detriment in reliance on an assurance relating to property, even in the absence of a formal agreement.
• Undue influence in transactions requires proof that a party’s free will was overborne at the time of the transaction; mere subsequent unfairness or misrepresentation is insufficient.
• Presumed undue influence typically does not arise in parent-child relationships; the burden to show actual undue influence remains with the claimant.
• Receipt of independent legal advice before entering into a transaction is strong evidence that the weaker party acted freely and with understanding.
• Overriding interests, as governed by the Land Registration Act 2002 and clarified in Williams & Glyn’s Bank Ltd v Boland, require actual occupation or discoverability at the relevant time to bind subsequent purchasers or mortgagees.

Conclusion

The court in Thompson v Foy clarified the tests for proprietary estoppel, undue influence, and overriding interests within the context of family property arrangements, emphasizing the significance of detrimental reliance, contemporaneous undue influence, and the statutory requirements for overriding interests.