Undue Influence
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46 terms
Terms | Definitions |
|---|---|
 Contractors Bonding Ltd v Snee- Richardson J | Undue influence consists in the gaining of an unfair advantage by an unconscientious use of power by a stronger party against a weaker in the form of some unfair and improper conduct, some coercion from outside, some overreaching, some form of cheating, and generally, though not always, some personal advantage obtained by the stronger party. It is directed at conduct within a relationship which justifies the conclusion that the disposition or agreement was not the result of a free exercise of the disponer's will. The doctrine is founded on the principle that equity will protect the party who is subject to the influence of another from victimization. |
| Royal Bank of Scotland v Etridge (No2), card 1 | Lord Nicholls treated undue influence as being concerned with the unconscientious use of power by a stronger party against a weaker -Possibility that Etridge suggests that undue influence cases may fit under the wider umbrella of unconscionable bargins |
| National Commercial Bank (Jamaica) Ltd v Hew | Lord Millet maintained that it does not matter how great the influence is, equity does not intervene unless an it has been abused. -Focus on exploitation |
| Barclays Bank Plc v O'Brien- Basic summary | Area of contention- Lord Browne-Wilkinson favoured dividing undue influence into categories |
| National Westminister Bank v Morgan- Basic Summary | Area of contention- The House of Lords set out a requirement of there being a manifest disadvantage to a weaker party |
| Royal Bank of Scotland v Etridge (No 2) -Basic Summary | The House of Lords rejected the O'BRIEN classification, explained MORGAN and, generally, restated the basis for a finding of undue influence |
| New Zealand Approach to undue influence | Used to follow O'Brien, however the ETRIDGE principles were affirmed and applied by the Privy Council in R v ATTORNEY-GENERAL FOR ENGLAND AND WALES, and now provide the foundation for future NZ developments. See recent case of HOGAN v COMMERCIAL FACTORS LTD, O'BRIEN and MORGAN both need to be be examined and then the re-evaluation of the law in ETRIDGE must be considered. |
| R v Attorney-General for England and Wales | PC affirmed and applied Etridge |
| Hogan v Commercial Factors Ltd | CA thought that both O'BRIEN and ETRIDGE were declaratory of the law of undue influence, and that ETRIDGE was merely explanatory of O'BRIEN. |
| Barclays Bank Plc v O'Brien: Classes of undue influence | Lord Browne-Wilkinson divided cases of undue influence first into two primary classes: -Where it was shown actually to have happened (Class 1) -Where it was presumed to have happened (Class 2) -In Class two, a claimant would have to show that there was a special relationship of trust and confidence, and that the transaction was manifestly disadvantageous to the claimant in order to create a presumption of undue influence |
| Barclays Bank Plc v O'Brien: Classes of presumed undue influence | Lord Browne-Wilkinson furhter subdivided presumed undue influence into another two categories: Class 2(A): Where undue influence was presumed as a matter of law (ie relationships such as solicitor and client, doctor and paitent, guardian and ward or parent and child) Class 2(B): Where the necessary relationship of trust and confidence must be proved on the facts of the case (ie between husband and wife, employer and employee) |
| National Westminister Bank v Morgan: Manifest disadvantage | The House of Lords held, that further to the O'BRIEN requirements, a transaction must create some form of MANIFEST DISADVANTAGE to the party alledging undue influence. Followed in NZ by Richardson J in CONTRACTORS BONDING LTD V SNEE, but the House of Lords subsequently held in CIBC MORTGAGES PLC V PITT that this requirement only exists in cases of presumed undue influence, as actual undue influence is a species of fraud, and the claimant has a right to set aside a transaction in such a case. |
| Contractors Bonding Ltd v Snee | Richardson J followed MORGAN, agreeing that a transaction where undue influence is alledged must create a MANIFEST DISADVANTAGE to the claimant. -Called into question by subsequent House of Lords judgement, CIBC MORTGAGES v Pitt, where it was held that such a requirement is only necessary in cases of presumed undue influence. |
| CIBC Mortgages v Pitt | House of Lords held that the requirement of MANIFEST DISADVANTAGE only exists in cases of presumed undue influence, as actual undue influence is a species of fraud, and the claimant has a right to set aside a transaction in such a case. -Called into question NZ approach in CONTRACTORS BONDING LTD V SNEE |
| Royal Bank of Scotland Plc v Etridge (No 2)- View of past law | HL thought that the O'BRIEN classifications were misleading and should be abandoned. They found that a finding of undue influence should be achieved by an evaluation of all of the relevant circumstances, unhampered by formal elements or requirements. |
| Royal Bank of Scotland Plc v Etridge (No 2)- Lord Nicholls' new position point 1 | -In certian cases, where there is a fiduciary or similar relationship between the parties, an irrebuttable presumption of trust and confidence is created. However, there is not legal presumption that any influence exterted was undue |
| Royal Bank of Scotland Plc v Etridge (No 2)- Lord Nicholls' new position point 2 | -Presumed and actual undue influence are actually the same in essence. The only differents are the requirements of what must be proved. For actual undue influence, the claimant proves the actual exertion of undue influence directly. For presumed undue influence, the claimant proves circumstances that justify the drawing of an evidential inference that undue influence has occured. |
| Royal Bank of Scotland Plc v Etridge (No 2)- Lord Nicholls' new position point 3 | -Such an evidential presumption arises when there is a relationship of trust, confidence, reliance and dependancy of one party over the other, and the circumstances of the transaction are such that they call for an explanation. May be a relationship recognised by the law (eg those mentioned in class 2A) or may be proved on the facts of the case. Relevant factors in regards to whether the transaction calls for an explanation include the size of the transaction and the disadvantage to the weaker party. Disadvantage is relevant, but not necessary |
| Royal Bank of Scotland Plc v Etridge (No 2)- Lord Nicholls' new position point 4 | The primary question in every case is whether undue influence has taken place on the facts that have been proved. The plaintiff carrys the legal burden of proof. However the evidential presumption can assist in finding presumed undue influence. The presumption can be rebutted by evidence showing that the weaker party was free from any undue influence |
| Actual Undue influence | -Overlap between actual undue influence and duress- Lord Nicholls -No clear dividing line between actual and presumed undue influence -If the claimant can show actual abuse of influence, the circumstances will most certianly call for an explanation anyway -Main difference is that in actual undue influence cases, the plaintiff provides evidence of somthing that has been done to twist the mind of a contracting party or donor, and in presumed undue influence cases, the focus is on evidence of a failure of a stronger party to protect the interests of a weaker one |
| Contractors Bonding Ltd v Snee | Example of actual undue influence, son made his mentally incapable mother give a guarantee for his company |
| Green King plc v Stanley | Example of actual undue influence, a son gave his parents materially flase impressions as to the extent and duration of the risks that they would run in executing a charge over their home |
| Daniel v Drew | Example of actual undue influence, a nephew tricked his aging aunt into resigning from a trust. |
| Presumed undue influence | Relationships in which one person places trust and confidence in another and circumstances which call for an explanation are infinitely various |
| Allcard v Skinner | Example of presumed undue influence, member of sisterhood required to donate property to either relatives or the sisterhood, transfer format favoured the sisterhood. Size of the gift was a factor in finding undue influence. Claim barred for time reasons |
| Brusewitz v Brown | Example of presumed undue influence, over a chronic alcoholic, who's drinking partner and friend acquired all of his property on his death in exchange for a small annual sum |
| Re Craig | Example of presumed undue influence, aging widower paid over most of his estate during the last years of his life to his secretary and companion |
| O'Sullivan v Management Agency and Music Ltd | Example of presumed undue influence, young and inexperienced musician agreed to extremely unfair terms given by his business managers |
| Goldsworthy v Brickell | Example of presumed undue influence, elderly farmer gave trusted neighbour tenancy and option to purchase farm |
| Niersmans v Pesticcio | Example of presumed undue influence, mentally disabled brother gifted his house to his sister |
| Re Brocklehurst's Estate | Example where presumed undue influence was rebutted, eccentric old man gifted hunting rights to garage owner, old man tended to dominate the relationship |
| ASB Bank Ltd v Harlick | Example where presumed undue influence was rebutted, mother and father gave guarantee to bank for daughter and son-in-law, relationship was simply a normal family one. |
| A-G for England and Wales v R -Presumed undue influence | Example where presumed undue influence was rebutted, a situation where a duress claim failed, if the situation was not illegitimate for the purposes of duress, then it was unlikely to be an unfair exploitation of a relationship |
| Rebutting the presumption of undue influence -Allcard v Skinner | Cotton LJ- It is rebutted where "it is proved that in fact the gift was the spontaneous act of the donor acting under circumstances which enabled him to exercise an independant will which justifies the Court in holding that the gift was the free exercise of the donor's will" |
| Inche Noriah v Shaik Allie Bin Omar | PC emphasised that if there is evidence to show that the contract was the act of a free and independant mind, the transaction will be valid even though no external advice was given |
| Hammond v Osborn | Gift of 300 000 pounds to neighbour -UK Court of Appeal ignored implications of ETRIDGE and found that even though there was no abuse or exploitation, it had not been affirmatively established that the gift was made of full, free and informed consent. -ETRIDGE would suggest that in order for the presumption to properly function, the onus would have been on the defendant to show that the transaction was not the result of abuse of a relationship or exploitation of the weaker party (which she would have been able to do). But the UKCA did not apply this rule and set aside the transaction anyway. |
| Hammond v Osborn: contrasts with ETRIDGE | Further guidance is needed in relation to this issue. There have been several situations where there has been no wrongdoing on the part of the defendant, which should be enough to rebutt the evidential presumption as per ETRIDGE, but undue influence has still been presumed. -Best approach would be treating failure to provide a donor with advice and information as abuse of influence |
| Result of undue influence being established | The contract or gift becomes voidable. Normally the parties will be restored to their original position, by transferring back the property and money paid for it. CHEESE V THOMAS -If assets have deteriorated in value, this will be the original contribution's proportion devalued respectively |
| Affirmation | A contract procured by undue influence cannot be rescinded after either express or implied affirmation. -Also cannot be avoided against purchasers who acquire rights under it for value and without notice of the facts -Can be avoided against purchasers for value who have notice of the possible undue influence -Also can be avoided against volunteers, even if they are unaware of the undue influence |
| Allcard v Skinner-Affirmation | A contract procured by undue influence cannot be rescinded after either express or implied affirmation. |
| Bainbrigge v Brown | An affirmed contract cannot be avoided against purchasers who acquire rights under it for value and without notice of the facts that suggest undue influence |
| Maitland v Irving | An affirmed contract can be avoided against purchasers for value who have notice of the possible undue influence |
| Suretyship transactions | It is possible for undue influence to be imputed to a person who did not personally exert the influence |
| Agency | Where a person exerting undue influence is the agent of a bank, the influence can be traced back to the transaction with the bank -Objective test as to whether they are an agent or not -Any question of agency will be subsumed by the question of whether the bank knew or ought to have known of the undue influence and have taken steps to counteract it. |
| Contractors Bonding Ltd v Snee-Agency | Richardson J- Where an actual appointment of the wrongdoer is established, there will be no difficulty in imputing the latter's actual or presumed undue influence to the third person principal. -May be a matter of establishing whether apparent agency has been established -Need a holding out of some authority to the wrongdoer by the principle -Objective test |
| Agency test | Objective -Whether a reasonable person in the complainant's position would have concluded that by setting the process in train the principal had held out the intermediary as agent in that regard. |
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