Undue Influence Flashcards
‘Actual’ and ‘presumed’ undue influence: two doctrines or one?
Royal Bank of Scotland plc v Etridge (No 2) [2002] 2 AC 773 (HL) [93]
Facts: To secure a loan the bank gets Etridge to put up his house and his wife to promise to pay off his debt/put up her share of the house if he defaults. He does. Mrs Etridge claims undue influence from her husband.
HofL says there is not 2 types of undue influence – actual and presumed. Instead there is only one – undue influence. The distinction is the evidence relied on/how you’re proving, not WHAT you’re proving.
(Lord Clyde): ‘a division into cases of “actual” and “presumed” undue influence appears … to confuse definition and proof. … At the end of the day, after trial, there will either be proof of undue influence or that proof will fail and it will be found that there was no undue influence. In the former case, whatever the relationship of the parties and however the influence was exerted, there will be found to have been an actual case of undue influence. In the latter there will be none.’
‘Actual’ and ‘presumed’ undue influence: two doctrines or one?
Royal Bank of Scotland plc v Etridge (No 2) [2002] 2 AC 773 (HL) [93] ] (Lord Scott):
‘The presumption of undue influence … arises if the nature of the relationship between two parties coupled with the nature of the transaction between them is such as justifies, in the absence of any other evidence, an inference that the transaction was procured by the undue influence of one party over the other. This evidential presumption shifts the onus to the dominant party and requires the dominant party, if he is to avoid a finding of undue influence, to adduce some sufficient additional evidence to rebut the presumption. In a case where there has been a full trial, … the judge must decide on the totality of the evidence before the court whether or not the allegation of undue influence has been proved. In an appropriate case the presumption may carry the complainant home. But it makes no sense to find, on the one hand, that there was no undue influence but, on the other hand, that the presumption applies. If the presumption does, after all the evidence has been heard, still apply, then a finding of undue influence is justified. If, on the other hand, the judge, having heard the evidence, concludes that there was no undue influence, the presumption stands rebutted. A finding of actual undue influence and a finding that there is a presumption of undue influence are not alternatives to one another.’
‘Undue’ influence means ‘unconscionable’ influence
Allcard v Skinner (1887) 36 Ch D 145 (CA) 183 (Lindley LJ):
‘to protect people from being forced, tricked or misled in any way by others into parting with their property is one of the most legitimate objects of all laws; and the equitable doctrine of undue influence has grown out of and been developed by the necessity of grappling with insidious forms of spiritual tyranny …’ – about wrongful exploitation of one of the parties
‘Undue’ influence means ‘unconscionable’ influence
National Commercial Bank of Jamaica v Hew [2003] UKPC 51 [33] (Lord Millett):
‘However great the influence which one person may be able to wield over another, equity does not intervene unless that influence has been abused. Equity does not save people from the consequence of their own folly; it acts to save them from being victimised by other people”
‘Undue’ influence means ‘too much’ influence
Allcard v Skinner (1887) 36 Ch D 145 (CA) 171 (Cotton LJ):
relief for undue influence is not given ‘on the ground that any wrongful act has in fact been committed by the [dominant party], but on the ground of public policy, and to prevent the relations which existed between the parties and the influence arising therefrom being abused.’ – issue is relationship between parties, and protection of a vulnerable party, not necessarily wrongful exploitation
‘Undue’ influence means ‘too much’ influence
Niersmans v Pesticcio [2004] EWCA Civ 372 [20] (Mummery LJ):
‘Although undue influence is sometimes described as an “equitable wrong” or even as a species of equitable fraud, the basis of the court’s intervention is not the commission of a dishonest or wrongful act by the defendant, but that, as a matter of public policy, the presumed influence arising from the relationship of trust and confidence should not operate to the disadvantage of the victim, if the transaction is not satisfactorily explained by ordinary motives.’
Does Proof of fault matter?
NO
Hammond v Osborn [2002] EWCA Civ 885, [2002] WTLR 1125
Case facts: Lonely old man has a kind neighbour who pops round, does some cleaning, friends. Old man says he’ll give her a present, she says thank you expecting chocolates or summat, he then offers her £300,000, 90% of his estate. Court makes a presumption in such cases of undue influence, which she must disprove. LJ sys, while he doesn’t believe she behaved badly, she must still give the mone back
Does Proof of fault matter?
YES
R v Att.-Gen. for England and Wales [2003] UKPC 22
secret SAS guy who wants to write his memoirs. Had agreed to the army not to. Says that he agreed that based on undue influence. Privy Council says it wasn’t undue influence as it did not unfairly exploit him when it got him to sign the contract. Army did not allow him independent legal advice which would usually be a big warning, but not relevant in this case as the contract was easily understood which he did
Do third parties matter?
Bridgeman v Green (1757) Wilm 58, 65 (Lord Commissioner Wilmot):
The question before the court was whether certain money, obtained by fraud, ought to be returned to the Plaintiff by a party who had received it, but was not a party to the fraud. Lord Commissioner Wilmot said, the receiver takes it tainted with the undue influence and imposition of the person procuring the gift.
‘Let the hand receiving it be ever so chaste, yet if it comes through a corrupt polluted channel, the obligation of restitution will follow it.’
That the undue influence was exerted by a third party to the contractual dealings is irrelevant, it is still tainted by that undue influence
Do third parties matter?
Barclays Bank plc v O’Brien [1994] 1 AC 180
Royal Bank of Scotland plc v Etridge (No 2) [2002] 2 AC 773
Wife guarantees husband’s business debts with mortgage on family home under UI from husband.
Bank says should only set contracts aside where we have actual notice of the undue influence
Lords says must consider that the wife didn’t really mean to expose herself to that contractual liability and did so only under undue influence. OTOH banks perform important social service and commercial certainty is required, and main form of security may turn out to be valueless bc of UI.
Bank is protected if it gets a letter from an independent solicitor saying that she got an understood independent legal advice - they are entitled to assume there was no undue influence. When someone comes for a loan bank must say your wife needs to go to independent solicitor.
Problem is that explaining legal consequences doesn’t free you from undue influence. HofL recognise this, but need to strike a balance. Has to give wife a chance, that isn’t expensive to administer, and gives bank confidence to keep on lending.
Do third parties matter?
Barclays Bank plc v O’Brien [1994]
Royal Bank of Scotland plc v Etridge (No 2) [2002]
difference
Evidential requirements to show constructive notice of undue influence that the bank must discharge is that the bank is on inquiry and that they fail to take reasonable steps to ensure that the transaction was entered freely without the exercise of undue influence.
What puts bank on inquiry?
O’Brien: Wife stands as surety to husband’s debts bc (a) wife receives no financial benefit and (b) there is a substantial risk of undue influence in her non-commercial relationships
Etridge: Wife stands as surety to husband’s debts. (a) and (b) in O’Brien are not further conditions but an explanation as to why
Causation
Bank of Credit and Commerce International SA v Aboody
Can’t use UI if you would have done it anyway
But for causation test
Causation
UCB Corporate Services Ltd v Williams [2002] EWCA Civ 555, [2003] 1 P & CR 12 [86] (Jonathan Parker LJ):
‘I cannot see any reason in principle why (for example) a husband who has fraudulently procured the consent of his wife to participate in a transaction should be able, in effect, to escape the consequences of his wrongdoing by establishing that had he not acted fraudulently, and had his wife had the opportunity to make a free and informed choice, she would have acted in the same way.’
Undue influence is a kind of equitable fraud, and a fault-based liability. Since the ability to rescind the contract aries from wrongdoing it follows that causation should not be “but for” but “a”.
Proving undue influence
Actual undue influence
Royal Bank of Scotland plc v Etridge (No 2) [2002] 2 AC 773 (HL) [8] (Lord Nicholls):
actual undue influence most often established with evidence of ‘overt acts of improper pressure or coercion’.
Proving undue influence
Actual undue influence
Bank of Scotland v Bennett [1997]
In this case husband says sign this or our marriage is over.
(James Munby QC, sitting as a deputy High Court judge):
‘moral blackmail amounting to coercion and victimisation’
