Undue Influence Flashcards
Undue Influence
Equitable doctrine. Wherever a party to a contract is subjected to improper pressure not amounting to duress at common law but nonetheless is considered to have brought about an unfair agreement, that contract will be voidable at the instance of the “victim” of the improper pressure.
Actual Undue Influence
Cases of actual undue influence arise where one party has applied direct pressure on the other to enter a contract, and are relatively rare.
The Irish courts have not provided any comprehensive definition as to what qualifies as undue influence, although in Carroll v. Carroll [1998] it was stated that AUI occurs where “no relationship gives rise to any presumption of undue influence, but the parties so alleging undue influence adduce evidence which satisfies the court, on the balance of probabilities, that the transaction was not the result of the free exercise of the will of the donor.”
No presumptions so a very high evidence bar exists.
Presumed Undue Influence
Where the relationship between the parties raises a presumption or where the facts of the case raise a presumption that undue influence has been applied, or used.
Contractors Bonding v Snee [1992] NZLR
Attempt to outline a test laying out the factors that must be proved for Undue Influence
That the party, or someone who induced the transaction for his own benefit had the capacity to influence the complainant
The influence was exercised
Its exercise was undue
Its exercise brought about the transaction
The transaction was to the manifest disadvantage of the complainant (not always the case?)
O’Flanagan v Ray-Ger Ltd
Mr. Pope and Mr. O’Flanagan were joint shareholders in the business. Mr. O’Flanagan is very ill with cancer, somewhat impressionable individual
Pope, in pub, makes a proposal about the future of the business
Pope says, if one of the dies, their share of the business instead of being inherited by their family members would be transferred to the surviving business partner
Agreement is finalized. In effect, when one of the shareholders dies, their very valuable shares, once to be inherited as part of their estate is now given to the business partner
Subsequently, Mr. O’Flanagan dies and as per the agreement, his shares are transferred
Outrageous, precisely the type of bargain you want set aside but, based upon Duress, this is impossible
Can’t isolate the threat
Pope exerted undue influence, as said by the Court
The decision to give his business to Pope rather than his wife and eight children was found to be an improvident one. Pope was “strong and forceful” and his influence amounted to domination over O’Flanagan
Also disparity in business acumen between the two parties and the agreement had taken away from business premises
PUI: Relationships
Where the parties to a contract are in a particular relationship whereby one places trust and confidence in the other, undue influence will be automatically presumed.
Here, it will be up to the party in whom trust was placed e.g. the stronger party to show that the agreement was freely and fairly entered into in order to rebut the presumption.
Parent and Child Lancashire Loans v Black: [1934]
Doctor and Patient Re CMG: [1970]
Solicitor and Client Wright v Carter: [1903]
Religious Association and Devotee: Whyte v. Meade [1840]
Guardian and Ward: Mulhallen v. Marum [1843]
Trustee and Cestui Que Trust: Provincial Bank v. McKeever [1941
White v Mead: Religious Association and Devotee
Young girl was just 18. Entered the Ranelagh Convent as a lodger
Friends averse to the idea of her becoming a nun. Thus it was envisaged that if the plaintiff decided at a later date to take holy orders, she could to so after consulting with friends
Early 20s, become a nun, hasn’t consulted with her pro-active friends.
May have been actively prevented from doing so
Assigns some of her property to the convent. later than year, assigns the rest. Without any advice
The deed of transfer was prepared by the convent’s solicitor while the plaintiff was in poor health
These agreements are challenged based on undue influence. Usefulness of the presumption. On the Convent to rebut this presumption. Unable to do so
No legal advisor from young girl
White v Mead: Religious Association and Devotee
Young girl was just 18. Entered the Ranelagh Convent as a lodger
Friends averse to the idea of her becoming a nun. Thus it was envisaged that if the plaintiff decided at a later date to take holy orders, she could to so after consulting with friends
Early 20s, become a nun, hasn’t consulted with her pro-active friends.
May have been actively prevented from doing so
Assigns some of her property to the convent. later than year, assigns the rest. Without any advice
The deed of transfer was prepared by the convent’s solicitor while the plaintiff was in poor health
These agreements are challenged based on undue influence. Usefulness of the presumption. On the Convent to rebut this presumption. Unable to do so
No legal advisor from young girl
McMackin v Hibernian Bank [1905]: Parent and Child
Young girl living alone with her widowed mother. Death of her father, mother has debts with the bank. Wants to borrow some money from the bank
Banks lend money with security. If the mother doesn’t pay back, somebody else will have to. Look for guarantee. Guarantor of adult daughter.
Effect of acting as an guarantor is explained to the daughter. No opportunity to seek independent legal advice.
Mother doesn’t pay back loan, bank seeks to enforce guarantee. Daughter argues undue influence, P/C Relationship. Court is satisfied and bank cannot rebut the presumption.
Barton J: “When the child is living with or under the control of the parent or guardian, such influence is presumed – and the burden of proof is thrown upon the person who has obtained the gift or security through the parent’s influence to displace that presumption, e.g. by showing that the young person acted under independent professional advice. Such independent advice must be a reality, not a sham; it must be a shield for the young person, not a mere cloak to cover up the transaction.”
Three party system. No sense of justice. Contract of guarantee between bank and daughter being challenged on presumed undue influence of the mother, who is not involved and is not a party to the contract
When guarantee is struck down, mother does not lose out.
Bank did not apply undue influence but they are the ones who are punished
Bank should have explained in detail the legal effect of the guarantee and encourage the daughter to seek independent legal advice
Carroll & Carroll v Carroll [2000]
Two sisters, attempted to set aside on the basis of undue influence on the conveyance of a pub with an attached house made by now, elderly father to his son.
At the time, father was 79, depressed, arthritic, depended on son for his needs. Son is happy 😄 Elderly gents two daughters are sad 😢 Said their father had promised them a home for life on the premises.
The father had not received independent legal advice or consulted his daughters, and they argued that the transaction was at odds with his stated.
intention to give the girls a home at the premises
The defendant accepted the presumption of undue influence arose, but argued that it was rebutted as the father had consulted a solicitor who had acted for father and son but who actually gave him objective and fair advice.
Shanley J set the transaction aside as the defendant had failed to establish, as a matter of probability, that the father had spoken to a solicitor, or read the transfer deed. He would have wished to provide a home for his daughter. The solicitor who advised the father had not been aware of the family circumstances.
Appealed, decision upheld. Denham J
(Lynch J concurring) pointed to the fact that the father was disposing of practically his only asset and was frail at the time. He had not retained any right of maintenance or support and the legal advice given to him was inadequate. Equity was required to intervene.
PUI: Facts
Where the relationship between the parties does not fall within the above categories, the party seeking to set aside the contract may be able to raise a presumption from the existence of a relationship in the context of which he has placed trust and confidence in the wrongdoer as a matter of fact.
For example, sibling relationships do not, of themselves, raise a presumption of undue influence. But if one brother can show that he was particularly close to or dependent on the other brother it may be possible to raise a presumption of undue influence without actually having to show undue influence as a fact.
McGonigal v Black [1988]
Elderly bachelor father. Socially isolated, no family. Alcohol problem, living alone in dire conditions. Vulnerable and lonely.
Barred from local pubs. Would insist on buying everyone a round of drinks.
Transactions with neighbour. Gives him fraction of land for a very low value: Says to neighbour that he’ll give him rest of land if he pays off his bank debt of 2,500 and if he gets 1,000 in Cash.
On a previous occasion the transfer had had to be postponed when the elderly man turned up drunk at his solicitor’s office accompanied by his neighbour.
Want set aside, doesn’t fall into duress or into actual undue influence, or by the presumption of a relationship.
Court was satisfied that the neighbour had dominated the farmer. Although the farmer had received independent legal advice the neighbour had managed to persuade him not to use the solicitor who had advised him for 40 years.
The solicitor who was used by the farmer had not been given adequate information. Inebriation did not mean he was incapable of contracting it required the Court to examine with care, any transactions conducted.
Presumption of undue influence arose from facts of this “grossly improvident transaction” and the defendant did not rebut it
Bars to Relief
Undue influence is an equitable doctrine. Equitable remedies are discretion-able, you don’t get them as a right
In deciding whether or not to exercise equity, factors of discretion: Maxims of equity; delay defeats equity, must show up to Court in due time
If you’re alleging you entered a contract because undue influence was placed on you, at some point you will no longer be under that influence. If you want the contract to be set aside, must go to Court ASAP
If you delay, Court may exercise discretion to not grant you equitable relief. Delay = Laches
Allcard v Skinner [1887]
Religious advisor and devotee
Woman, 27, has a spiritual advisor who is also some kind of advisor to an enclosed Protestant sisterhood, the Sisters of the Poor.
This SA acts for both the order and the plaintiff. Plaintiff joins the order. Takes a vow and donates property to Sisterhood to be used for charitable purposes.
Subsequently, 8 years later, the woman decides she would like to leave the sisterhood. Undue Influence upon her was at an end. Court was satisfied that no unproper pressure was placed upon her other than the vows of such a life, and no improper use was made of her money.
But, presumption of UI did arise in other ways, due to the great powers inherent of religious influence, legal advice should have been independently given, even if this would have been ignored.
Lindley LJnoted that legal proceedings had only begun 6 years after she had left the convent- too long for the transactions to be set aside
Remedies
Undue Influence appears to be all or nothing. The deal is either struck down, or not. They will not rewrite the contract
