Rescission (Undue Influence) Flashcards
Talk a little bit about an agreement that is set aside or avoided
|— Grounds - Mistake / misrepresentation / unconscionable bargain / under influence
|— Defect - vitiating party’s decision to enter the transaction
What is the consequence of transaction being set aside and declared void ab initio?
|— future obligations are cancelled
|— parties restored to pre-transaction position (as much as possible)
Bonus:
Case: Northern Bank Finance Corporation v Charlton
restore status quo ante - at least substantially -> if not possible, won’t be ordered,
What is the cases that recognises that undue influence has two classes?
|— alcard v Skinner
What is the first class of undue influence and what are the important cases?
Class 1 - Actual undue influence -> influence was in fact -> onus on the party alleging UI to prove actual UI -> established on facts, no special relationship needed -> cases are rare
|— Carrol v Carrol / Barclays Bank v OBrien -> Necessity to prove
|— Flanagan v Ray-ejer - Division of UI in two classes recognised
|— Bank of Scotland v Bennett - Husband threatened wife to sign morgage as guarantee of his company’s debt - COA found a husband had exercised actual undue influence
What is the first item of the second class of undue influence and what are the important cases?
Class 2 - Presumed undue influence - onus on D to prove it did not existed
Class 2a - specific relationships - presumption arises automatically - one party has a superior position and the other is vulnerable and dependent
|— Royal Bank of Scotland v Ettridge - only arises if transaction is manifestly disadvantageous to the vulnerable person or/and confers a substantial benefit to the superior party (Comes from allcard v Skinner)
Relationships : child/parent, ward/guardian, client/solicitor, pupil/religious, adviser, patient/doctor, beneficiary/trustee - once relationship is proved and transaction calls for explanation , onus reverts to D to prove influence did not exist
|— Irish Bank Resolution v quinn and Anor - presumption does not arise in husband / wife relationship
What is the second item of the second class of undue influence and what are the important cases?
Class 2 - Presumed undue influence - onus on D to prove it did not existed
Class 2b - presumed undue influence - relationships of trust and confidence is influential disadvantage - any two people -> claimant must prove relationship is influential -> does not arise automatically - once two elements are proved, onus revert to D to rebret presumption of UI - Relationship of Trust and Confidence
Relationship of Trust and Confidence
|— Gregg v Kid - between brother and sister - he was dependent on her - voluntary gift to nephew set aside - court found sister forcefeel and determined
|— Carrol v Carrol - father transferred pub to son and obtained legal advice from his solicitor - P were sisters - D son’s wife - transaction set aside - legal advice not independent + decision not spontaneous
|— Prendergast v Joyce - woman with Alzheimer transferred account to joint name with nephew in law is transaction set aside - lack of independent advice
spouses - not class 2a, but may gier rise to class 2b
|— Barclay Bank v OBrien - suggested class 2b presumption is easier to erraisol where there is emotional/sexual relationship (readily weapon)+ special tenderness to wifes - criticised in Bank of nova Scotia v hogan
|— Simpson v Simpson - illness or dependency of spouse can give rise to presumption
Transaction Calling for investigation - claimant must prove it involved something substantial
|— Smyth v Smyth - showing a fair market price paid sufficed to allow transaction to stand
Rebretting the presumption - onus rests on D
|— Caroll v Coud - quoted Biehler - easiest way is to prove independent legal advice or spontaneous and independent act
Talk a little bit about Undue Influence and third parties
general rules: UI - transaction will be void against third parties on notice of circumstances giving raise to UI - Main issue - bank enforcing guarantee obtained against wife depends on bank’s actual or constructive notice. constructive notice when:
- it was on enquiry
- failed to take reasonable steps to ensure free will of guarantor
Cite 3 cases of UI 3rd Parties in England
|— Barclays Bank v OBrien- wife executed charge over family home without reading the instrument as security for H’s company overdraft
- circumstances putting the bank on enquiry - transaction not to wife’s advantage ; substantial risk that wife would be entitled to set the transaction aside, no prima facie interest in the loan by wife emotional relationship. Creditor must take reasonable steps to satisfy itself agreement was properly obtained
- meeting wife alone
- explaining liability and risks
- uccomending independent advice
|— CIBC Mortgages v Pitt - H persuaded W to obtain loan to purchase shares - CoA held transaction was not manifestly disadvantageous to the wife - could no prove undue influence nor situation putting the bank on enquiry
|— Royal Bank of Scotland v Ettridge - Bank should be on enquiry every time relationship is non commercial - avoid constructive notice by insisting on independent advice - communicate directly with wife - require written confirmation from a solicitor. she won’t be able to dispute being bound.
Cite 3 cases of UI 3rd Parties in Ireland
Family home Protection Act 1976 - demand spouse consent to convey interest in the family home
|— Bank of Ireland v Smyth - consent must be fully informed to be valid - constructive notice if bank is aware of relationship and disadvantage to the wife and failed to explain the risks or insist that she obtain legal advice - validity of consent depends on the state of knowledge the spouse
|— Bank of Nova Scotia v Hogan - approved O’Brien w guaranteed a loan for H - not family home + she received legal advice bank’s solicitor - no undue influence - she was an independent business woman - notice is irrelevant unless undue influence exists
|— WesterBank v Fitzgerald - w guaranteed debts of a business she was dependent on - relied on income generated by business - court found no evidence to put B on notice - Bank didn’t know of marriage problems +explained transaction - less onerous obligation - suggests bank is on enquiry when know about additional information, increase likelyhood of UI
|— Ulster Bank v Roche - overeled Fitzgerald as it gives insufficient protection D made P (his girlfriend) director of his business + loan guarantee - no involvement on the business - psychologist confirmed dependant and abusive relationship - bank was on notice as knew about their relationship and lack of involvement / no shareholder - should have taken reasonable steps to ensure free will
|— Ulster Bank v DeKrester - w guaranteed H’s business - business woman, no evidence amounting to UI
|— Bank of Ireland v Curran - reaffirmed noticed is irrelevant if no UI
|— ACC v Comdly - principles in Roche and Etridge only apply when UI ahs been made
Talk a little bit more about expansion to other relationships
|— ACC Bank v McEllin - Ettridge and Roche could be relevant when elderly parent guaranteed child’s debt
|— ACC v Sheetan - would be a major evolution of principles
Talk about the other grounds
- Improvidence - unconscionable transaction - defendant’s exploitation of P’s vulnerability (poverty, ignorance, old age, etc) - parties met on unequal terms - academic debate about unification with undue influence
- Misrepresentation - even if serious enough to provide defence for SP action, may not suffice for rescission
|— Northern Bank Finance Corporation v Charlton - fraudulent misrepresentation may be ground for rescission - may not be ordered if restituio in integuim is no possible
if misrepresentation is innocent, rescission / won’t be granted if transaction is executed - if is executory + mistep was made with the intention to persuade + P in fact relied uppon it - may be ordered - Gahan v Boland
- Mistake - mistake serious enough to be a defence on SP, may not be serious enough rescission
|— Cooper v Phibs - P was entitled to property he had leased - agreement
|— Solle v Butcher - leading modern case - mistake about rent - controled flat because it was renovated - lease rescinded - parties under a common misapprehension
|— overruled in Great Place Shipping v Trarbiris - no jurisdiction to grant rescission of a contract on the ground of common mistake where that contract is valid and enforceable
