Undue Influence

Question 1

Undue influence

Answer 1

Undue influence is an equitable doctrine while exists where a contract has been entered into where one party has been exploited by the other to gain an unfair advantage

Question 2

Actual undue influence

Answer 2

Where a claimant can prove they entered the transaction as a result of undue influence

Allcard v Skinner - class 1
"Some unfair and improper conduct,some coercion from outside...and generally though not always some personal advantage for the guilty party"

“Gift must be so large it cannot reasonable be accounted for”

Question 3

Presumed

Answer 3

May be presumed where there is a pre existing relationship of confidence between the two parties - fiduciary relationship

Eg/ parent and child -class 2a
~>lloyds bank v bundy- banked with lloyds many years and placed trust in their advice

2b- no special relationship but trust was placed in the wrong doer

Question 4

Pre o’brien

Special equity theory

Answer 4

Turnbull and co v Duvall 1902

Wives shouldn’t be allowed to make these decisions

Question 5

Yerkey v Jones 1939 pre o’brien

Answer 5

Creditors should prove the wife understands the transactions she’s entering into

Question 6

Pre o’brien

Agency theory

Answer 6

Leaving everything to the husband might be tainted by any undue influence by husband over his wife

~>Barclays bank v Kennedy

Question 7

Chen wishart

Answer 7

Pre o’brien fortunes of Husband and wife are bound up together

Question 8

BCCI v Aboody

Answer 8

Due to husbands hysterics at a joint meeting law lords suggested husband and wife should be interviewed separately

Question 9

Coldunell Ltd v gallon and midland bank Plc v shepherd

Answer 9

Notice is pivotal to determination of creditors liability

Tainted by impropriety if creditor should have realised the possibility of husbands undue influence

This approach was adopted by o’brien

Question 10

Barclays Bank v O’brien 1994

Answer 10

Mr O’brien wanted to put jointly owned home as security for business debts

Told her it would guarantee an overdraft of £60,000 when real amount was £135,000

11 cases on simile facts in previous 8 years

Lords decided bank had constructive notice of undue influence

Had to take steps to show it did not have notice of undue influence

To avoid constructive notice a bank must take reasonable steps to ensure agreement was freely given, advise wife separately, and explain implications including her potential liability and advise her to get independent advice I

Question 11

Two types of transactions in o’brien

Answer 11

1) creditor put on notice if transaction was financially disadvantageous
2) joint response eg loan to buy a joint family car then not out on notice unless special circumstancesy known to creditors

Question 12

CIBC mortgages Plc v Pitt

Answer 12

Manifestly disadvantageous

Creditors believed his an and wife were making a joint advance for a holiday home and both seemed to benefit equally

Question 13

O’brien and aftermath

Answer 13

Never intended to offer an definite exposition of the law applicable in every conceivable situation

Represented a framework of principles which lower courts would need to adopt and modify

Unpredictability of subsequent case law meant greater clarity was required

Question 14

O’brien subsequent case law

Goode Durrant administration v biddupth

Answer 14

Creditor put on notice in a single joint advanced transaction because of significant disparity between wife’s potential gain and her liability

Creditor did nothing to advise the wife

Thai broad approach isn’t beneficial to the wronged wife

Question 15

O’brien subsequent case law

Bank of baroda v rayerel

Answer 15

Acceptable for a wife to be advised by husbands solicited

Question 16

O’brien subsequent case law

Midland bank Plc v Massey

Answer 16

Once advice given by solicitor the bank was relieved of any further responsibility

Best policy was for banks to else everything to the solicited as it exonerated them of any culpability

Undue influence Gregory Mitchell- ‘likely to be an increase in the amount of claims against solicitors in respect of advice

Question 17

Royal bank of Scotland v etridge

Answer 17

Laid down guidelines for avoiding constructive notice and disregarded disadvantageous transaction

Combined appeal of 8 different cases which raised similar issues

In 7 of the cases wife had allowed matrimonial home as surety for husbands debts

Eighth appeal claim against solicited who acted for her

Five appeals allowed 3 dismissed

To avoid constructive notice a bank had to take reasonable steps to satisfy itself the wife had been informed of the practical implications of proposed transaction

Bank can rely on solicitor but if creditor withheld info or knew no solicitor could advise wife to enter transaction then it’s insufficient for a creditor to avoid constructive notice

Extended principle to encorportate all non commercial debtor/surety relationships

Question 18

Lord Nichols in etridge on manifestly disadvantageous

Answer 18

Inappropriate label for giving rise to ambiguity and courts should abandon the label and adhere to the rest outlined in allcard

Question 19

Etridge steps a solicitor should take

Answer 19

Explain the nature of the documents and explain practical consequences

Point out the seriousness of the risks

State clearly the wife has a choice

Check whether the wife wishes to proceed

Should not give any confirmation to the bank without the wife’s authority

Obtain any info from the bank he needs

Question 21

First national bank Plc v achampong

Answer 21

Reaffirmed etridge

Creditor must confirm independent advisor covered all essential points

Question 22

Pesticcio v huet and ors

Answer 22

Court of appeal concluded the solicitor has not in fact advised his client appropriately

Involvement of a solicitor did not guarantee a contract would be free from undue influence on the face that the advice given by solicitor was inadequate

Question 23

Fair balance?

Answer 23

Courts need to ensure wealth in matrimonial homes does not become economically sterile

Law cannot operate in a social vacuum~> wife may not be subservient to husband in managing family funds

Important that a clear legal safety net exists

HoL decisions show transaction may be unenforceable if proper procedure isn’t followed but a wife acting as surety does not mean there’s been undue influence more evidence is needed

Wife will struggle unless clear evidence of disparity between husbands gain and her potential loss is disproportionately large

Approach swings unfairly towards protection of creditors

Question 24

Mckendrick

Answer 24

Etridge makes it harder for wives and places a larger burden on solicitors f

Question 25

Undue influence - where the disadvantage? - Georgina Andrews

Answer 25

Decision I etridge clarified the precise nature and extent of the obligations of banks

Maid eat disadvantage is controversial- presumes so claimant must prove this or it be ‘sufficiently clear and obvious’

~> origins of this in allcard v skinner- doctrine only applies to transactions ‘not to be reasonable accounted for on the grounds of…ordinary motives