Setting aside 'unconscionable bargains

In Valerie Deadman v Parminder Singh (Medway County Court, 1 September 2015), Deadman purchased a property for £77,000 in 2001, and in November 2009 she sold the unencumbered property ?for £20,000, apparently to discharge unsecured debts of around £7,500.

She subsequently brought ?a claim to set aside the sale on grounds of unconscionable bargain and fraudulent misrepresentation. Singh argued that any special disadvantage Deadman was under was mitigated by having independent legal advice from conveyancing solicitors. His Honour Judge Simpkiss decided the matter in Deadman’s favour.

To establish her case on fraudulent misrepresentation, Deadman had to prove that Singh made a false representation (that the transaction that she was entering into was an equity release scheme and not a sale), which he intended the claimant to rely on. 

Deadman needed to satisfy three requirements before the court could intervene on the grounds of unconscionable bargain: 

• At the time she entered ?into the transaction she ?was under some special disadvantage (e.g. poverty or ignorance);

• The defendant exploited ?her weakness in a morally culpable manner (acted ?with impropriety); and

• The resulting transaction was overarching and oppressive (transactional imbalance). 

Special disadvantage covers poverty, including persons on low income, and ignorance, including those less well educated. Where the claimant has instructed solicitors, this can serve to redress the relational imbalance arising from the special disability, or rebut the presumption of impropriety, which arises where there is a large transactional imbalance which calls for an explanation.

Impropriety can be inferred ?by the court from the nature ?of a transaction where the bargain is so unreasonable ?from the disadvantaged party’s perspective that it is difficult ?for the court to accept at face value that they entered into it without impropriety on the part of the purchaser. Where the bargain is harsh or oppressive ?to the claimant, there is transactional imbalance.

Independent advice

There is no requirement that there be a lack of independent advice. Independent advice ?has relevance to the issue of ignorance and special disadvantage as it can redress the balance between the parties. It is also relevant ?to the stronger party’s unconscionability as the stronger party may be entitled to assume the weaker party has received appropriate advice from the independent solicitor.

In an exceptional case, a court may find that the transaction is unconscionable even though ?a party was represented in the transaction, as was the case in Boustany v Pigott (1995) 69 P& CR 298. Where legal advice was received by the disadvantaged party, one key factor to setting aside the sale will be the adequacy of the advice received and the other side’s awareness of the quality of the advice. ?Also relevant will be whether ?the disadvantaged person was in a position to evaluate and ?act upon the advice received ?by their solicitor.

Action points

• Ensure you have a clear chronology of the relationship between the claimant and the solicitor: 

(a) Was any advice given about the actual transaction? 

(b) If so, was that advice given before or after the transaction which the disadvantaged party is seeking to set aside?

(c) Who paid the solicitor?

(d) How did the solicitor ?come to be instructed? 

(e) What, if any, records exist of the first communication between the solicitor and ?the disadvantaged party?

(f) What, if any, was the relationship between the solicitor and the purchaser?

• Identify the nature and extent of the legal advice received. What do the solicitors hold themselves out as advising about specifically? Are they advising on the decision ?to sell or simply acting ?on the conveyance? Was independent advice about the transaction received?

• Thoroughly consider the manner in which the conveyancing forms have been completed – when ?are they dated? What, if ?any, period of time was left between the client care ?letter and the transactional documents?

• A case in which there seem to be errors worthy of ?being classified as professional negligence may warrant further consideration as ?to whether it is of such an extent that it is as if there ?was no legal advice.