Duress and undue influence

Question 1

Illegitimate pressure

Answer 1

Is the preferred term (The Universe Sentinel [1983]).

Question 2

Duress to the person

Answer 2

Duress to the person is actual or threatened violence to the person (Skeate v Beale (1841)) or a relative (Barton v Armstong [1976]). The threat depends on the ability of the person to resist the threat (Scott v Sebright (1886)).

The threats are valid to make a contract voidable even if the plaintiff would have entered the contract anyway (Barton v Armstrong [1976]).

Question 3

Duress of the goods

Answer 3

Duress of the goods is the threat to damage or illegally seize goods (The Alev [1989]).

Question 4

Economic duress

Answer 4

Economic duress is where no option other than to enter the contract is presented (The Sibeon and the Sibotre [1976]). A threat to break an existing contract counts (North Ocean Shipping v Hyundia Construction). Veiled threats also count (B&S Contracts v Victor Green Publication [1984]).

Question 5

Link of duress and the contract

Answer 5

There must be a sufficient link between the duress and the contract, it must be ‘a’ cause of it (Barton v Armstong [1976]). In cases of economic duress it must be a significant cause (Huyton v Cremer [1999]).

Question 6

Alternative remedies

Answer 6

Alternative remedies must be unavailable. The existence of a better alternative precludes duress (The Alev [1989]).

Question 7

Good faith

Answer 7

The good faith of a party is relevant in determining duress (CTN Cash and Carry v Gallaher [1994]) and a threat must be backed by a demand (unlike in Roffey Bros where the claimants took the initiative).

Question 8

Threat of lawful action

Answer 8

Threat of lawful action is not duress (Leyland v Automotive Products [1994]). It can be if the threat is immoral (Vaughan v Royscot Trust [1999]). Requesting a large sum of money for rescue makes the contract voidable (The Port Caledonia [1903]).

Question 9

Remedy for duress

Answer 9

The remedy for duress is rescission to restore the position of the parties (Halpern v Halpern [2007]).

Question 10

Undue influence

Answer 10

Undue influence was set out in a case containing 8 appeals, known collectively as Royal Bank of Scotland v Etridge (No 2) [2001] in which Nicholls set out the principles with which the rest of the Committee agreed.

Question 11

Nature of undue influence

Answer 11

It is an equitable doctrine and includes “overt acts of improper pressure or coercion such as unlawful threat” or “a relationship between two persons where one has acquired over another a measure of influence, or ascendancy of which the ascendant person then takes unfair advantage” as laid out by Nicholls.

Question 12

Actual undue influence

Answer 12

“The first comprises overt acts of improper pressure or coercion such as unlawful threat… “

In this case evidence of influence must be adduced (Allcard v Skinner)

Question 13

Presumed undue influence

Answer 13

“The second form arises out of a relationship between two persons where one has acquired over another a measure of influence, or ascendancy of which the ascendant person then takes unfair advantage… “

In this case influence is presumed and can only be rebutted by evidence to the contrary (Allcard v Skinner).

Question 14

Requirements of actual undue influence

Answer 14

• such domination over the mind and will of the other is required
• no abuse of confidence need be proved

Question 15

Smith v Kay (1859)

Answer 15

a young man was influenced by an older man who professed to assist him in a career of extravagance. Thus the relationship, not at all fiduciary, entitled the young man to protection from the court.

Question 16

Morely v Loughnan [1893]

Answer 16

a member of a religious order exacted a payment of £140,000 from a man before he died as he exercised full control of his life. The courts held that it was unnecessary to decide whether or not any special relationship existed between the parties, only that he affected his free will.

Question 17

CIBC Mortgages v Pitt [1994]

Answer 17

Business man put pressure on his wife to mortgage their home for business debts. His influence was such that his wife’s mind was merely a channel for his own.

Question 18

Relief for actual undue influence

Answer 18

Actual undue influence is enough for relief – it is not necessary that a manifest disadvantage has occurred. “Actual undue influence is a species of fraud…” and as a result the effect on the innocent party’s free will is enough to set aside the contract “as a matter of justice.” (CIBC Mortgages v Pitt [1994])

Question 19

Requirements of presumed undue influence

Answer 19

A relationship of special trust must exist to invoke this presumed influence. (Tate v Williamson (1866).

Two things must be esablished:

• the nature of the relationship is one that can create undue influence
• the transaction is one thta calls for explanation

Question 20

Tufton v Sperni [1952]

Answer 20

It is not enough that the claimant’s mind was a ‘mere channel through which the will of the defendant operated’

Question 21

Bank of Credit and Commerce Int’l v Aboody [1990]

Answer 21

This case divided presumed influence into two classes, approved in Barclays Bank v O;Brien [1994]:

• Class 2A is where duties of care and confidence arise as a matter of law by virtue of the relationship between the parties
• Class 2B is where they arise in special circumstances of the parties’ association

Question 22

Class 2A

Answer 22

Where duties of care and confidence arise as a matter of law
Etridge clarified that only these cases create presumed undue influence.
It is only needed that the influence could exist, and is not presumed that the influence was undue.

Question 23

Class 2B

Answer 23

Under the Etridge approach the burden of roof remains on the claimant but can be discharged by establishing a sufficient prima facie case.

Question 24

The nature of the relationship

Answer 24

It is made as a matter of law in some cases; in others, proof is required.

Question 25

Presumed relationships of undue influence

Answer 25

• Parent and child (Bainbrigge v Browne (1881))
• Solicitor and client (Wright v Carter [1980])
• Doctor and patient (Mitchell v Homfray (1881))
• Trustee and beneficiary (Beningfield v Baxter (1886))
• Spiritual adviser and any person who stands in that relationship (Huguenin v Baseley (1807)
• Sometimes, fiancé and fiancée (Re Lloyds Bank [1931])

Husband and wife is not one presumed as a matter of law (Barclays Bank v O’Brien [1994]).

Question 26

Nicholls in Etridge on presumed undue influence

Answer 26

Nicholls stated that the test is whether one has reposed such trust in another rather than whether the relationship belongs to a particular type and that no single touchstone is applicable. Lord Scott disagreed as this creates uncertainty and as a matter of policy it is better for specific relationships arise.

Question 27

Husband and wife relationships

Answer 27

Undue influence is not presumed as a matter of policy - but it can easily be demonstrated due to the wife’s general concern to keep the husband happy by not resiling from his wishes (Barclays Bank v O’Brien [1994]).

Question 28

Husband and wife principles for other relationships

Answer 28

The circumstances are considered and the degree of trust is paramount.

Question 29

Tate v Williamson (1866)

Answer 29

T was in debt for college loans and a family member offered to buy part of his estate for £7,000. The family member found out, before the sale was made, that the land was worth £20,000. After T died, the sale of land was set aside as the two were in a relationship of trust and confidence and as a result all material information must be disclosed.

Question 30

Tufton v Sperni [1952]

Answer 30

. T and S were part of a committee to establish a cultural centre in London where T would provide the funds. S thus induced T to buy S’s house for this purpose at a price which grossly exceeded its market value and the contract was set aside. It was held that in charitable ventures each stage reposes confidence.

Question 31

The transaction must require explanation

Answer 31

It is not enough that a relationship of trust and confidence exists - there must be a transaction that is not readily explicable by the relationship and calls for explanation

Question 32

Goldsworthy v Brickell [1987]

Answer 32

drew on Allcard v Skinner (1887) to state that the presumption is not seen until a gift is made that is so large that it cannot be accounted for on the grounds of friendship, relationship, charity or other ordinary methods under which men act. “Although influence might have been presumed beforehand, it is only then that it is presumed to be undue.”

This is to prevent every innocuous gift in relationships of trust and confidence giving rise to undue influence.

Question 33

National Westminster Bank v Morgan[1985]

Answer 33

A transaction must be ‘manifestly disadvantageous’ to the giver. This requirement was criticised for only looking at the financial aspect of the consideration in question (ignoring the sentimental value of the good).

This approach was discarded in Etridge.

Question 34

Etridge on ‘manifest disadvantage’

Answer 34

It was replaced with the question of whether the transacation is reasonably accountable on grounds of friendship, relationship, charity or other thing (reverting to the Allcard v Skinner test)

Question 35

A-G v R [2003]

Answer 35

The question is whether the nature of the transaction gives rise to an inference that it was gained through an unfair exploitation of the relationship.

Question 36

Rebutting the presumption

Answer 36

D must prove that the party reposing confidence in them made a free and unfettered judgment (Archer v Hudson (1844)). The best way is to show that they took independent legal advice and followed it.

Question 37

Powell v Powell [1900]

Answer 37

a settlement was executed by a young woman under the influence of her stepmother, over some property that they shared. The young woman received independent advice from a solicitor but he was acting for other parties to the settlement. Although he expressed disapproval of the transaction he had not carried this to the point of withdrawing his services. The settlement was rescinded.

Question 38

Huguenin v Baseley (1807)

Answer 38

a woman handed over her property to a clergyman in whom she reposed confidence and it was thus rescinded.

Question 39

Essential thing to rebut the presumption

Answer 39

The essential thing is to show the transaction was an exercise of independent will (Inche Noriah v Shaik Allie Bin Omar [1929]).
f this is established the transaction will be upheld despite the lack of independent advice (Re Brocklehurst [1978]). There must be a full appreciation of the facts however and independent advice does not automatically rebut the presumption.

Question 40

Rescission

Answer 40

(Same misrepresentation principles apply here)

The parties must be restored to their original positions (Dunbar Bank v Nadeem [1998]).

Question 41

Equitable remedies

Answer 41

Flexibility is shown in providing remedies. In O’Sullivan v Management Agency and Music [1985] an inexperienced pop star and an internationally recognised management firm, when having their contract rescinded, had to account for their profits but were entitled to payment for their expert services rendered.

Question 42

Severance

Answer 42

If a part of the contract made under undue influence is severable without rewriting the contract, that will occur (Barclays Bank v Caplan [1998]).

Question 43

Affirmation of transaction

Answer 43

As soon as the undue influence is withdrawn,the party may show that the wanted to affirm the transaction.

Affirmation will not bar the right to rescind unless the undue influence is completely gone. The necessity of this was stated in Moxon v Payne (1873).

Question 44

Mitchell v Homfray (1881)

Answer 44

a gift from a patient to a physician could not be reclaimed after the relationship ceased.

Question 45

Allcard v Skinner (1887)

Answer 45

a woman joined a protestant sisterhood and bequeathed all her possessions to a superior in the sisterhood and wrote a will in the superior’s favour. After leaving the sisterhood in 1879 she changed her will and it was not until 6 years later that she tried to reclaim her possession. Her claim to reclaim her possessions was barred by acquiescence.

Question 46

Rights of third parties

Answer 46

They are protected when they do not know of the undue influence (Bainbrigge v Brown (1881)).

However if they know of the undue influence the contract will be set aside against them too (Bridgman v Green (1757)).