Rescission Flashcards
When is it ordered, what is its effect and what is its aim?
When is it ordered? When there’s a defect vitiating a person’s decision to enter a transaction.
Effect? The transaction is void ab initio: all future obligations cancelled and all benefits restored.
Aim? To restore the parties to the position they were in before they entered the transaction.
Undue Influence
AIB plc v Rostaff Property [2017]: - Shied away - Henchy J
Barrett J noted courts have shied away from defining UI, but Henchy J
described the concept as embracing ‘unfair, undue and unreasonable mental control over another’.
Undue Influence - Actual UI
O’Flanagan v Ray-Ger Ltd [1983]
recognised the categories of UI as set out in Allcard v Skinner [1887]:
(1) Actual Undue Influence (Class 1): where it can be expressly proved that undue influence was exercised over the donor by the donee.
(2) Presumed Undue Influence (Class 2): where relations bw donor and donee have at or shortly before
the execution of a gift been such as to raise a presumption that the donee had influence over the donor
Undue Influence - Actual UI
O’Flanagan v Ray-Ger Ltd [1983]
- A + B only shareholders in co. A terminally ill. B aware. B more dominant personality. Brought A to pub and proposed agreement that when one dies, their shares will pass to the other.
- Not to A’s best interests as always unlikely he’d survive B. Set aside as B exercised UI over him.
Undue Influence - Presumed UI
Barclays Bank v O’Brien [1993]
identified two sub-categories of presumed undue influence:
(a) Class 2A: Presumption arises automatically based on their confidential relationship and the transaction was to their manifest disadvantage.
(b) Class 2B: Presumption arises when a relationship is proven to be one of trust and confidence and the
transaction was to their manifest disadvantage.
Undue Influence - Presumed UI - Class 2A: Presumed Relationship + Proof of Manifest Disadvantage
Give examples of presumed relationships and cases?
(i) The transfer of property by a child to his parent
McMackin v Hibernian Bank [1840]
M signed guarantee in favour of mum who had debts. M lived with mum. Just turned 18. Despite transaction being explained to her, held she’d got no independent advice thus rescinded.
(ii) The transfer of property by a client to his solicitor: Lawless v Mansfield [1841]
(iii) The transfer of property by a pupil to his religious advise: Allcard v Skinner [1887]: nun + mother sup
(iv) The transfer of property by a patient to his doctor
(v) The transfer of property by a beneficiary to his trustee
Irish Bank Resolution Corp v Quinn [2011] Confirmed husband and wife do NOT fall under class 2A.
Undue Influence - Presumed UI - Class 2A: Proof of Manifest Disadvantage
Allcard v Skinner [1887]: - readily explicable
If undue influence is to be presumed, the transaction must not be readily explicable on a basis other than undue influence. more disadvantageous the transaction, more likely it’s not so explicable.
Undue Influence - Presumed UI - Class 2A: Proof of Manifest Disadvantage
Cheese v Thomas [1994]
Old man paid neph life savings for right to live in house he’d just sold him.
Undue Influence - Presumed UI - Class 2B: Must Prove Relationship of Trust and Confidence + Manifest Disadvantage
General rule?
Class 2B presumption of UI arises in respect of a transfer of property but only if:
(i) The transferor had trust and confidence in the transferee; and
(ii) The transaction was manifestly to the disadvantage of the transferor.
Undue Influence - Presumed UI - Class 2B: Must Prove Relationship of Trust and Confidence + Manifest Disadvantage
Gregg v Kidd [1956] - stroke
- Presumption arose in respect of transfer of property by a man to his sister and her son.
- G had serious stroke, entirely dependent on sister. Feared his future if his sister stopped caring for him
Undue Influence - Presumed UI - Class 2B: Must Prove Relationship of Trust and Confidence + Manifest Disadvantage
Carroll v Carroll [1998]:
Presumption arose in respect of a transfer of property by a man to his son.
Undue Influence - Presumed UI - Class 2B: Must Prove Relationship of Trust and Confidence + Manifest Disadvantage
Prendergast v Joyce [2009] - Widow - Alzheimers
- Presumption arose in respect of transfer of property by woman (now deceased) to nephew-in-law (D)
- Less than a week after her husband’s death, D brought her to two banks where , at D’s request, accounts previously held in joint names of her + husband were transferred into joint name of her + D
- 3 weeks later, she was admitted into a respite home for people with Alzheimers. Held presumption not
rebutted: as hadn’t got independent legal advice, didn’t understand the nature +effect of the transaction
Undue Influence - Spouses
Barclay’s Bank v O’Brien [1994]
- H + W execute second mortgage over family home as security for H’s company (W no interest in it)
- Court suggested that it is easier to raise the 2B presumption if there’s an emotional or sexual relationship between transferor and transferee i.e. easier to prove trust and confidence reposed in H/W
Undue Influence - Spouses
Bank of Nova Scotia v Hogan [1996]: - women’s capabilities.
Criticised in Ireland in the SC here (women’s capabilities).
Undue Influence - Spouses
Royal Bank of Scotland v Etridge [2001]:
HOL thought a transaction where W agrees to guarantees H’s
business debts is not one calling for explanation as W’s interests often bound up inextricably w H’s fortunes
Undue Influence - Rebutting the Presumption of Undue Influence
Carroll v Carroll [1998] - 2 factors
- Son convinced dad to transfer pub into his name. Dad mentally alert but largely dependent on son. Only advice was solicitor that’d been acting for the son. Accepted presumed UI. Onus on D to rebut.
- Held the manner in which the presumption may be rebutted relates to two main issues:
(a) Whether independent legal advice has been received (noted need not be legal)
(b) Whether it can be shown the decision to make gift/transfer was a spontaneous and independent act or that donor acted of his own free will.
Undue Influence - Rebutting the Presumption of Undue Influence
MC v FC [2014]:
MacMenamin J said the onus can be discharged by evidence showing the gift was the independent and well understood act of a person in position to exercise free judgment.