Boris Ignachkov Legal Principles and Key Points
- In the case of Cresswell v Potter [1978] 1 WLR 255, it was established that a notice letter outlining the effect of a legal document may cover a piece of independent advice related to signing that document and that it is suggested that legal advice is sought.
- The cases of Fry v Lane [1888] 40 Ch D 312 and Earl of Aylesford v Morris [1873] 8 Ch App 484 were followed by Justice Megarry, including an application of the tripartite test set under the latter case.
Facts of the Case
- C (Hilda Frances Cresswell, a telephonist) and D (Ivan Victor Potter) got married in 1955 and purchased a mortgaged house on D’s name
- C had not contributed financially for the purchase of this house, but understandably under common practice, had paid for some of the materials for refurbishments carried out by D, his father and his friends
- D appraised C’s contributions at £65, though C believed they were £200
- This house was sold three years later with a profit of £300-£350 (after the mortgage was paid off) and the parties purchased a new estate in Essex with an acre and a half of land, but this time C and D were registered as joint tenants
- C separated from D in June of 1959 due to becoming pregnant from another man
- In August 1959, C agreed to relinquish her interest in the property and transferred her interest in the estate to D via a deed of release and conveyancing (this too meant that she was absolved from any liability under the mortgage agreement; D had sent his solicitor to present C with a legal document for surrendering her rights, which C signed)
- This experienced solicitor had drafted the agreement upon D’s instructions that C had agreed to surrender her interest
- Upon being presented with the legal document, C had asked an inquiry agent whether she would receive any money and the agent speculated that she would, so C signed the document without having read it
- Following matrimonial proceedings, the formal dissolution of the marriage was ascertained later in the year (the start of October 1959 saw the issuing of this decree nisi on D’s petition)
- D sold the property after the divorce via separating it into two and selling the first part of the estate for £1,950 in 1960 and the second part – for £1,400 in 1961
- D reported a profit of £1,400
Issues in Cresswell v Potter [1978] 1 WLR 255
- C brought an action claiming that the property’s release was ineffective against the sale and that she ought to have received half of the profits; D argued the contrary – that the sale was valid
Held by the Chancery Division of the High Court
- Action successful – held that D had not managed to prove that the transaction was fair, just and reasonable
Justice Robert Megarry
Justice Meggary examined the situation through Lord Selbourne LC’s test in Earl of Aylesford v Morris [1873] 8 Ch App 484
- Justice Meggary believed C was “poor” and that there was a sale at a “considerable undervalue”
- The judge believed that the absence of C’s solicitor and conversion of a verbal statement into a formal transaction were serious matters
- Justice Meggary advised that a cover letter inclining C towards the usage of legal advice ought to have been sent by D:
- “It would not have been very difficult to send to the plaintiff a short covering letter which explained that by signing the release the plaintiff would be giving up her half-share in Slate Hall to the defendant in return for nothing except an agreement by him that she would never have to pay anything under the mortgage, adding that she ought to consider getting independent advice before signing the document. If in the teeth of that information the plaintiff had executed the release without obtaining such advice, I think that the requirement that there should be independent advice might well have been discharged. In other words, I do not think that the requirement of independent advice should be regarded as an absolute. But here there was no attempt whatever to comply with the requirement, whether absolute or qualified.” [p.260 D-E]